In the short term, though, the West can’t devastate Russia’s energy sector—in which Western companies such as ExxonMobil, Shell, Total, Eni, Statoil, BP and GE are all heavily invested—without damaging itself. A longer-term option could involve efforts to deflate real oil and gas prices gradually, either by reducing growth in energy consumption or boosting supply. But that has made strategic and economic sense for decades and not much has changed. It’s hard to see Russia’s annexation of Crimea being the trigger for a fundamental shift in the global energy business.
One proposal is for the United States to sell off some its Strategic Petroleum Reserve (SPR) to cause an immediate fall in crude prices. At the last count, the SPR held 696 million barrels of oil in depots along the Gulf of Mexico. Energy expert Philip Verleger calculates that the United States could release between 500,000 to 750,000 barrels per day from it for two years without breaching international obligations to keep 90 days’ worth of equivalent oil imports in storage. Rising U.S. production has undermined the need for the SPR to hold so much oil. Sell off the excess, Verlager argues, and global oil prices would fall by $10-12 a barrel, costing Russia $40 billion in lost revenue and wiping 4 percent off its GDP.
Would the United States do it? It recently agreed to sell 5 million barrels from the SPR, ostensibly for technical reasons, though the announcement was seen as a message to the Kremlin. One analyst quoted by Platts, an oil-price reporting agency, likened the move to “cleaning the shotgun on the porch when your daughter has a date coming over.”