Oil prices surge, gas hits new high after E.U. cracks down on Russia

Drivers in seven states — including Illinois, Nevada and Oregon — are averaging $5 or more a gallon while Californians are shelling out more than $6. Motorists in every other state are paying at least $4 a gallon, on average.

The European Union agreed Monday to curtail the use of Russian oil within months, an effort it said would cut roughly 90 percent of oil imports to the member nations. But the bloc made concessions to exempt pipeline deliveries, and several countries will get extensions or exemptions to the ban, according to E.U. officials and diplomats.

Pavel Molchanov, an analyst with the investment bank Raymond James, said that because the E.U. embargo only targets tanker deliveries, at least for now, the global market can adjust by rerouting seaborne shipments. So instead of shipping oil to European countries, he said, Russia will boost shipments to other markets, such as China, India, and Turkey. In turn, those countries will buy less oil from the Mideast, whereas more Middle Eastern oil will go to Europe, he said.

“Ultimately, it will cancel out, or just about, in the sense of global supply,” he said.

Still, even before the embargo, Russian oil exports have fallen, in part due to several major marine shipping companies refusing to transport Russian cargo, including petroleum.

The cost of crude oil climbed to new heights in March, following the Russian invasion of Ukraine. Since then, prices at the gasoline pump have followed, with Americans feeling a sudden cost crunch. Gas prices spiked almost twenty percent at the outset of Moscow’s aggression. But even as crude oil prices have fallen some, prices at the gas station remain elevated. This phenomenon, dubbed by economists as rockets and feathers, follows a pattern in which increases in crude prices send pump prices quickly upward, like a rocket, but when crude prices fall, pump prices tend to descend slower, like a feather.

Following the E.U. announcement, prices for both the international and U.S. benchmark for oil surged, with Brent crude increasing by 2 percent and West Texas Intermediate rising 3.5 percent. Shares of ExxonMobil, Shell and Occidental Petroleum Corp. also got a lift, rising 1.7 percent, 0.8 percent and 1.4 percent, respectively.

Meanwhile, the broader stock market began the trading week with mixed results, as investors grappled with the global economic sanctions and continue to wrestle with the ramifications of high inflation, rising interest rates and shifts in consumer spending.

The S&P 500 fell by 36 points or 0.9 percent in afternoon trading. The tech-heavy Nasdaq dropped by 110 points or 0.9 percent, while the Dow gave up more than 300 points or just under 1 percent to kick off the last trading day of the month.