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By Connor Smith | Tuesday, March 8 Moscow's
Main Artery. President Joe Biden finally pulled the
trigger on a ban of Russian oil imports. Oil prices spiked while U.S. stocks
wobbled. “Today I’m announcing the
United States is targeting the main artery of Russia’s economy. We’re banning
all imports of Russian oil and gas and energy,” Biden said during a press
conference. As the president was
speaking, Brent crude, the international benchmark, spiked 7% to $131.87. The
S&P 500 index, which briefly traded higher in the
early afternoon, closed down 0.7%. The Dow Jones Industrial Average
fell 0.6%, while the Nasdaq Composite dropped
0.3%. Barron's Avi Salzman writes
that Russia exports nearly five million barrels of crude oil a day. He adds
that the U.S. has been importing about 200,000 barrels a day of crude oil and
about 400,000 barrels of refined products from Russia. Skyrocketing oil prices
raise the possibility of a recession. Oil prices have more than doubled from
a year ago. They doubled before three prior recessions too—in 1990, 2000, and
2008. High prices for gasoline and diesel will boost inflation and could
cause people to spend less on goods and services. The Federal Reserve will
also face pressure to rein in inflation without sinking the economy, a
delicate balance that’s often led to messy outcomes. Oil could theoretically
spike to record levels and then crash because of a recession. RBC Capital
Markets Michael Tran thinks “it is not unfathomable for prices to rocket to
$200 per barrel by summer, spur a recession and end the year closer to $50
per barrel ($200 call options have been bid).” “To be clear, this is not
our base case, but such a scenario does not sound implausible today,” he
wrote. Surging oil prices may
make electric vehicles sound more appealing, but there are commodity
problems, there, as well. The London Metal Exchange suspended
trading in its nickel market Tuesday after the metal price surged as much as
250% in two days, according
to Bloomberg. Russia produces 17% of the world's top-grade nickel,
Bloomberg reports, which is used for EV batteries. A host of companies
including Coca-Cola, Starbucks,
Yum! Brands, and Bumble
also said they would suspend or pull operations in Russia. But McDonald's
was the big one: its first restaurant in Moscow opened in 1990, ahead of the
collapse of the Soviet Union. The New York Times writes
that an estimated 30,000 people lined up on opening day for what was a symbol
of Western culture to Russians. CEO Chris Kempczinski
said in an email to employees released by the company that it was impossible
to predict when they would reopen. |
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