Oil sanctions against Russia will be difficult to attain since Russia is among the leading 3 oil producers, in addition to USA and Saudi Arabia, and replacing the oil currently provided by Russia will be impossible in the short term and will require challenging choices in the long term.
An immediate world boycott of Russian oil and/or natural gas is not a reasonable goal. The profits from the export of these items is a significant income source for Russia and is likely to continue despite the desire to cut it off as part of a sanction program.
U.S.A is now a leading oil producer, at about 18 million barrels/day. Saudi Arabia, and Russia each produce about 11 million barrels/day of crude oil. While Russia accounts for about 11% of world oil production, they only export about 7 million barrels/day. Nevertheless, replacing 7 million barrels/day of oil without a corresponding increase in production and export from the rest of the world would imply that the world would need to consume about 7% less oil.
Europe and the rest of the world will have much greater trouble replacing the oil that it imports from Russia. There simply isn’t another oil producer that can increase its exports to replace the shortage that would be created by boycotting Russian oil.
China, who gets oil from a Siberian/Pacific pipeline, is not likely to stop buying oil from Russia, but this leaves open the concern of how the remainder of the world might replace the rest of the oil that Russia exports.
Making up a 7 million barrel/day shortfall with an increase in United States and Saudi oil exports within even 3 years is unlikely. This would require development of new wells, pipelines to transport the oil, and refineries and/or oil terminal capacity – all of which take years to develop. USA has a moderate amount of drilled but uncompleted wells, but over the past few years, oil exploration and development companies have been completing the most promising uncompleted wells and those that have not yet been brought into production are the least promising ones.
Drilling permits for 1.7 million acres of offshore tracts in the Gulf of Mexico were auctioned to various oil companies in November 2021, out of a possible 80 million acres of federally-controlled area, but exploration, drilling wells, and setting up the infrastructure to transport oil from those wells will take time.
Even if the missing Russian exports could be replaced by newly-completed wells, existing United States production levels are constrained by readily available pipeline capability, the capacity of domestic refineries for domestic intake, and oil terminal capacity for exports.
Saudi Arabia is currently at about peak capacity.
Canada needs additional pipeline capacity and oil terminal capacity to increase exports. The much-discussed proposed Keystone XL pipeline would just be able to transport 830,000 barrels/day of heavy oil from Canada to Texas to be either improved or exported from there. While that would definitely be a substantial addition to capacity, it is not even 10% of Russia’s day-to-day output.
Even though USA is a major oil producer, it has been an importer of oil and petroleum products from Russia. As of 2021, USA imported about 209,000 barrels/day of crude oil and about 500,000 barrels/day of refined products from Russia.
Oil Companies Want to Avoid Dealing with Russia but have numerous Joint Ventures
Shell and Exxon have oil joint endeavors with Russia including oil production and some operating wells are operated by these companies on Russia’s behalf and it will be complicated to unwind those arrangements. BP has announced that it is taking out of a partnership with Russia that was valued at USD 28 billion, however which it will need to jot down or potentially absolutely cross out if it can not discover a purchaser for its interest.
Given that there is no other major oil supplier that can replace most or all of Russia’s oil exports, lets take a look at alternative energy sources:
Wind Solar Hydro Nuclear and Natural Gas as Replacement Energy Sources
Solar Power: It generally takes 2 – 3 months to build a small solar power farm a after getting the land and approvals. There need to be backup from on-demand generators, which are generally powered by natural gas turbines.
Wind Power: Europe has developed and continues to build windmills to produce electricity, and offshore windmills produce substantial power for some European countries. Large wind turbines are large-scale jobs, specifically overseas windmills that require special equipment to establish, and the structure and related hardware for an offshore wind turbine is generally a 2 year job. Moreover, wind is not continuous and if the wind wanes over a wind farm for a couple of hours or a few days, the power from that source must be replaced by another source, typically from a generator powered by gas, due to the fact that battery backup is not enough to bridge an outage that can last for days, as was recently shown in 2021.
Hydro Power: Hydro power tasks need a large river or tank that is elevated enough to drop through a generator turbine to produce electricity. Most locations that are proper for this purpose have actually already been established, and developing a brand-new place for hydro power usually involves flooding a location to develop a reservoir, and presuming that this damage is acceptable, such a large scale project takes years. In years where there is a scarcity of rain or snowfall, then hydro power is minimized due to the decreased supply of flowing water.
Natural Gas: Natural gas turbine generators are a mature technology that can be built on a little scale or large scale. Obtaining land and licenses and building of a large scale generator plant might take a year or more. Europe already relies on Russia for providing a large portion of its natural gas, and while USA is a significant exporter of liquified natural gas (LNG), the LNG terminals and special ships needed to export LNG are running at capacity and it takes over a year to build a brand-new LNG-carrying ship. Boycotting Russian natural gas would require the world to find suppliers with the capability of increasing exports to make up the shortfall, and that is in addition to the LNG required to replace Russian oil as an energy source.
Nuclear Power: Nuclear power is a source of power that can last for a year or more prior to a power plant need to be closed down for maintenance and refueling. More modern modular power plants can go even longer intervals between maintenance and refueling. The lead time for acquiring a location, approvals, and building and construction is measured in years. Small scale modular generators may significantly reduce this delay, however they are still being evaluated in pilot presentation programs.
Coal: Coal is the dirtiest but one of the lowest cost energy sources, and when oil and natural gas go up on price or are in short supply, utilization of coal will increase despite it being the most environmentally damaging energy source. It is a safe bet that some countries will quickly shift to using more coal as a short-term measure, if they already have facilities to use it.
Price increases for crude oil, refined products, natural gas, and electricity will lead to some reduction in consumption, investment in energy conservation, and development of increased capacity for energy production and export. Countries with sufficient supplies and pipeline capacity for natural gas and have additional capacity to use coal will increase utilization of these resources as oil supply is reduced and oil prices increase. Increased prices will result in some immediate reductions in the least productive uses of energy, where choices are available. How quickly these measures will allow the world to cut back or eliminate the use of Russian oil and natural gas remains to be seen. The best we can hope for is a mild winter, that will reduce energy consumption used for heating buildings.
