Texans should expect soaring oil, gas prices amid Russian invasion of Ukraine

AUSTIN (Nexstar/AP) — The conflict in Ukraine is already translating to soaring oil prices — something that is normally welcomed by the state’s producers, but it could end up hurting consumers. 

Russia’s invasion of Ukraine sent the stock and energy markets into a frenzy, swinging low then high Thursday. Oil prices climbed above $100 per barrel as Russia began attacking Ukraine — the highest level since 2014. But oil prices gave back much of their gains after Biden said the sanctions package is “specifically designed to allow energy payments to continue.” Biden also said he wanted to limit the economic pain for Americans.

Beyond its tragic human toll, the conflict looked set to send prices even higher at gasoline pumps and grocery stores around the world as prices for oil, wheat and corn soared. Russia and Ukraine are major producers not only of energy but also grains and various other commodities.

For Texas, the world's third largest oil and natural gas producer, high oil prices are usually a good thing for producers as they can get more for their product.

However, since Russia is also one of the world's top producers for oil and gas, experts have concern about disruption if sanctions are imposed on Russian oil, or if it cuts off its natural gas supply to Europe.

"Anytime you have uncertainty about a producer being able to communicate or convey their product to market, it makes everything more expensive," said Ehud Ronn, a finance professor at the University of Texas at Austin.

In the possible event that the flow of Russian oil is disrupted, Texas refineries may have to step up. At his press conference Thursday, President Joe Biden said the United States "will release additional barrels of oil as conditions warn."

Doing so certainly would be costly and difficult, due to the process of sending natural gas over long distances when sending it through pipelines isn't possible. To send natural gas overseas, Texas has to liquefy its gas.

"There's only so much we can export. It depends on a fair amount of infrastructure that needs to be built here and there," Ronn said. "...You need liquefaction facilities here. You need tankers, and you need regasification at the other end. So all of this needs to be built up to some extent."

Todd Staples, the president of the Texas Oil and Gas Association, said this underscores the importance of domestic energy production.

"We are a net exporter of natural gas to the globe, and we think those demands will continue," Staples said. "...There is no substitute for being secure and our energy resources." 

Higher energy and food prices could amplify worries about inflation, which in January hit its hottest level in the United States in a couple generations, and what the Federal Reserve will do in turn to rein it in.