As of now, Putin is profiting from his invasion. That is because oil prices are up on the risk of a supply disruption. This enriches the Russian state budget, half of which is supported from oil and gas exports. But economist Philip Verleger notes that prices can go down as well as up, and he recommends inflicting pain by engineering the former.
The tool is the US Strategic Petroleum Reserve, the 700-million-barrel underground cache of crude oil waiting in Texas and Louisiana for a rainy day (see chart below). In an overnight note to clients, Verleger argues that if the US were to ship just 500,000 barrels a day of oil onto the market, it would drive down prices by about $10 a barrel and cost Russia about $40 billion in annual sales. The US could keep doing this for years, he says. “[Russia's] GDP might drop 4%, which would certainly count as a ‘consequence,’” he says. Half would come from lower oil prices and half from gas sales, whose prices Russia indexes to oil.
This is a great suggestion on paper, but it would mean a president who isn’t beholden to the fringe environmental extremist who would be appalled at the notion of actually domestic increasing oil release and oil consumption. That’s sad, isn’t it — that Saudi Arabia would be more likely be a willing partner in such a plan — a plan I would add where the Saudis make less money — then Obama’s constituency?
The WSJ’s Holman Jenkins had some similar ideas — “Unleash Europe’s antitrust case against Gazprom,” “Embargo Gazprom LNG tankers (it recently bought its fifth) from Western ports,” “Withdraw Europe’s support for pipelines Mr. Putin wants to build,” “Get moving on the pending U.S. trans-Pacific and trans-Atlantic trade partnerships, which grant member countries automatic approval of U.S. liquefied gas exports,” “Let Exxon and other Western oil firms queuing up to explore Siberia and Russia’s Arctic know their efforts are not currently appreciated. A single caustic hearing on Capitol Hill should do it.”
All great ideas, but Jenkins is the first to acknowledge that Europe is so tied to Russian energy exports that they would be unlikely to rock that boat. But, once again, I would submit that as hard as those things would be, it’s nothing compared Obama, had he even the guts to try, and he doesn’t, convincing his the extreme environmentalists who helped elect him.