How the Russia-Ukraine crisis will affect U.S. energy prices

The Russian government's moves to redraw the map of Ukraine, while threatening to conduct a wider and more devastating invasion, is already impacting turbulent energy markets.

Why it matters: The clearest way Americans will feel the price of the conflict may be in the form of energy costs, especially the price of gas at the pump.

The big picture: Russia is one of the world's top oil and gas suppliers, and Europe relies on the country for about 40% of its natural gas supplies.

• As expected, natural gas prices in Europe climbed Tuesday as a result of the ominous developments.
• In particular, Germany's decision to halt the certification process for the Nord Stream 2 pipeline, which would carry Russian gas directly to Germany, is a potential paradigm shift in Europe's energy politics.
• Depending on their severity and targets, European Union and U.S. sanctions could prompt Russia to curtail oil and gas exports to the West, forcing prices to rise and punishing NATO economies.
• U.S. officials warn this will only hasten Europe's energy diversification.

Threat level: President Biden has been trying to prepare Americans for the possibility of added energy costs as a result of allied country Russian sanctions. "Defending freedom will have costs for us as well, here at home. We need to be honest about that," Biden said yesterday.

• The administration has been working to secure alternate sources of natural gas for Europe should Russia shut off exports, as well as pursue measures to keep U.S. gas prices in check.
• But that will be tough with tight global supplies.

• Biden pledged to take steps to blunt price increases, saying, "I want to limit the pain the American people are feeling at the gas pump," he said. "This is critical to me."

Of note: One option the White House may choose would be tapping the Strategic Petroleum Reserve again, but this has limited effectiveness.

Yes, but: The U.S. has not revealed specific commitments, other than general language about working with other energy suppliers, including large LNG exporters such as Qatar.

Between the lines: Russia appears poised to conduct a major invasion. This would trigger additional and far harsher sanctions.

• These sanctions could have unintended consequences for the energy sector, which the White House aims to avoid.
• ClearView Energy Partners cautioned yesterday that Russia's "connectedness to global markets" as well as oligarchs' ownership in energy companies may make repercussions difficult to completely avoid.

Go deeper: Russia-Ukraine crisis opens new era of petro politics