US officials believe Putin’s aggressive rhetoric is at least partly a hoax, as Russia needs revenue from energy exports to fund its war effort, even at lower prices. But President Biden’s aides have in recent days reviewed their efforts to export liquefied natural gas to Europe, aiming to see if there is any way for American producers to help. (Roughly 40 percent of the natural gas that Europe uses for heating and electricity came from Russia before the war began.) And while White House aides do not believe that a recession in Europe will necessarily lead to a recession here, a complete shutdown of Russian oil exports would be dangerous. It hurts the US economy, according to economists, energy analysts, and internal White House assessments.
Mounting pressure from Russia could put new strains on a US-European alliance that has proven surprisingly resilient since the start of the war, while also threatening to overshadow the Biden administration’s recent economic victories ahead of this fall’s midterm elections.
Some economists and Wall Street analysts have said inflation may have peaked After an encouraging federal report for the month of July. However, administration aides are concerned that the situation could rapidly worsen again if Putin cuts off oil and gas shipments, two White House officials said, speaking on condition of anonymity because they are not officially authorized to speak.
the look In Europe it has deteriorated surprisingly quickly in recent weeks. The European Central Bank raised interest rates by 0.75 points last week, as officials said they expect a “significant slowdown” there this fall. Some European governments Resist attempts To cap the price of natural gas for fear of provoking Putin, and it is not clear that international economic sanctions on Russia can withstand a truly terrible energy crisis.
Publicly, Biden administration officials are playing good economic news at home. Biden and Treasury Secretary Janet L. Yellen embarked on a winning streak last week to tout a string of legislative victories — notably the Inflation Cut Act, It passed only with the votes of Democrats It aims to bring about large-scale changes in the US economy. Their sense of optimism was reinforced by tens of consecutive weeks of falling gas prices. Jobless claims have also fallen in recent weeks, allaying fears of an impending recession, and voter anger over inflation appears to have been at least somewhat soothing, helping to improve Democrats’ poll numbers.
White House officials – and most economists – believe that the growing possibility of a recession in Europe is unlikely to change under the current trajectory. A senior administration official, who spoke on the condition of anonymity to reflect internal assessments, said the Treasury and Council of Economic Advisers estimate that the impact on the United States from the European recession will likely be “modest and manageable.” Trade with Europe accounts for less than 1% of US GDP, and many economists agree that the decline in European consumer demand probably won’t significantly affect US companies. America also produces enough of its own natural gas to be less affected by Russia’s restriction of its flow to Europe.
If Russia continues to sell oil to world markets and only reduces gas exports to Europe, the impact on the US economy is likely to be minimal. In fact, it can help American companies that produce natural gas. It could also drain global demand, further easing domestic price pressures.
“If Europe goes into a recession, there is clearly less demand for a wide range of products,” said Dean Baker, an economist and co-founder of the Center for Economics and Policy Research, a liberal think tank. “We’re in such a bad situation here that it might actually be a positive.”
US options to assist Europe during its energy crisis may be limited. Already, the Biden administration has overseen a massive expansion in the amount of liquefied natural gas being shipped from cracker plants to Europe, with nearly 70 percent of U.S. gas exports now going to Europe, according to administration estimates. The United States has already exceeded its goal of transporting an additional 15 billion cubic meters of natural gas to Europe this year. Since last March, administration officials said, US companies have delivered 30 billion cubic meters to Europe — more than double the amount during the same period last year.
Administration aides have been brainstorming in recent days to increase that number even more, as Europe considers drastic measures to deal with power shortages. (Administration officials emphasized that for months the White House had been looking at any possible way to increase natural gas exports to Europe.) But there seems to be no quick way to increase the capacity of the terminals that help ship gas across the Atlantic.
“We’re of course very concerned about the entire global outlook,” Yellen told reporters Thursday as she traveled to Dearborn, Michigan, to talk about how Democrats’ legislation would stimulate Ford’s production of new electric cars. “We are doing everything we can with LNG to be beneficial.”
But a complete shutdown of Russian oil will threaten the US economy even more. softens For months it has led its international counterparts in pressuring allies to unite around a specific price to buy Russian oil, arguing that it could simultaneously undermine the Kremlin’s finances while shielding the global economy from energy shocks.
Moscow reacted angrily. Speaking at a conference last week after the Group of Seven industrialized nations agreed to implement the measure, Putin said Russia’s reaction would be to “do nothing”. “We will not supply gas, oil, coal and heating oil,” he said.
United State A ban on Russian oil purchases was announced in MarchBut if global oil prices rise due to the complete shutdown of Russian exports, then American consumers will feel it.
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That is enough to alarm economists whose optimistic forecasts are liked by White House aides.
“Russia will cut its oil exports before it gets a significant price discount,” said Mark Zandi, economist at Moody’s Analytics. This will push the economy into recession. Gasoline prices will skyrocket, back to a record $5 a gallon overnight. The economy can’t digest $5 a gallon – that would be massive.”
But for now, Treasury officials are publicly insisting that Putin will not pursue this threat. They also noted that Europe was planning to implement a complete embargo on Russian oil, and that the price ceiling represented an opportunity for the Kremlin to continue supplying world markets.
“Russia may be arrogant and say it will not sell below the set price, but the economics of curbing oil is meaningless,” Deputy Treasury Secretary Wali Ademo said on Friday.