WASHINGTON, July 10 — On the ground at filling stations across the country, the price of regular gasoline averaged $3.52 per gallon in 2023, according to the U.S. Energy Information Administration. That number could climb if proposed tariffs on Russian oil move forward. The plan, still under development, targets Russian crude.
While the United States imports approximately 6.3 million barrels of crude oil per day, the vast majority comes from Canada, followed by Mexico and Saudi Arabia. The U.S. does not import significant volumes of Russian oil directly.
But the global oil market is interconnected. A 10% rise in global oil prices, based on historical correlations, could push U.S. gasoline prices up by about 25 cents per gallon. The mechanism is straightforward: Russian oil is a major component of global supply.
Tariffs that remove or raise the cost of that supply drive up prices worldwide. American motorists, even though they buy little Russian crude, would feel the effect at the pump.
This comes as the Federal Reserve has spent time trying to tame inflation. The Consumer Price Index for energy rose by 30% in 2022, a surge that helped push overall inflation to a peak of 9.1% in June 2022. The Fed responded aggressively, raising interest rates 11 times between March 2022 and July 2023, from near zero to a range of 5.25-5.50%.
The proposed oil tariffs could complicate those efforts. Higher gasoline prices feed directly into inflation readings. If the tariffs push energy costs up, the Fed may face renewed pressure to keep rates elevated or even raise them further.
The plan remains under development, officials say.
Global oil, local pumps
The U.S. imported about 6.3 million barrels per day of crude oil in 2023. Canada supplied the largest share, with Mexico and Saudi Arabia next in line. Russian crude barely registers in American import figures.
But oil trades on a global market, and the price of benchmark crudes moves in concert. When the price of Russian oil rises due to tariffs, buyers in Europe and Asia compete more aggressively for non-Russian supply.
That bid up prices for American refineries, which pass the cost to drivers. The historical correlation is well established: a sustained 10% jump in global crude prices typically lifts U.S. gasoline by roughly a quarter per gallon. The impact would be felt unevenly across regions.
Inflation déjà vu
The energy-driven inflation of 2022 is still fresh. The CPI for energy jumped 30% that year, and overall inflation hit 9.1% in June 2022. The Fed’s 11 rate hikes between March 2022 and July 2023, taking the federal funds rate from near zero to 5.25-5.50%, were a direct response.
The proposed Russian oil tariffs threaten to reignite that cycle. Even if the broader economy has cooled, energy prices remain a volatile wild card.
The Fed has signaled caution about cutting rates prematurely. A new energy price shock would reinforce that caution. The policy is still under development, but its potential consequences are already clear.
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