As Russia-Ukraine tensions drag on, energy markets are jittery

Energy markets were on edge Monday, waiting for Russia to invade Ukraine or to back off its threatening posture. The stakes are high because Russia is Europe’s primary source of natural gas and supplier of roughly one of every 10 barrels of oil the world consumes.

Oil prices have risen to well over $90 a barrel in recent days as Russian troops massed along Ukraine’s borders, and many experts say an outright invasion would send the price above $100 a barrel. The average price for regular gasoline in the United States has risen to nearly $3.50, a rise of almost 20 cents over the last month and nearly $1 more than a year ago, according to AAA. Diesel prices are rising a penny a gallon every day.

With oil supplies already tight as the world economy recovers from the pandemic, most energy prices are at their highest since 2014. That has helped drive up inflation, weighing on consumer spending.

Oil markets started the day rising nearly 2 percent, but then slumped later in the session. European natural gas prices rose about 6 percent.

The biggest immediate threat from a Russian invasion would be Russian natural gas exports through Ukrainian pipelines that flow to Europe. If the gas stopped flowing, many Europeans could lack heat as utilities cut back on their capacity to produce power and factories might have to shorten their hours of operation. Russia could also restrict oil exports — 700,000 barrels a day land in the United States. Those moves would, of course, damage the Russian economy as well, and make the economic sanctions promised by Washington and its allies all the more punitive. That threat may turn out to be the primary reason that President Vladimir V. Putin of Russia eventually looks for a compromise.

There are reasons to hope an energy crisis could be averted. The United States has been producing an increasing amount of oil in recent weeks, and a nuclear deal with Iran could be in the works that would release as much as a million barrels a day on the world market. The current winter is relatively mild, and the wind is blowing far stronger than last winter, giving wind power a critical push. And the Biden administration has had some success in finding additional liquefied natural gas supplies for Europe by persuading Japan and other Asian consumers to forgo some supplies so the energy can be diverted to Europe.

Global oil production has not kept up over the last year with the growth of demand despite the lingering pandemic. While output of several members of the Organization of the Petroleum Exporting Countries has declined, there have also been interruptions of production among other producers outside the cartel, including Ecuador and Kazakhstan, because of natural disasters and political turmoil. At the same time, many commuters have given up on mass transit because of fears of infection and drive their autos instead.

A diplomatic settlement, of course, would relieve the pressures and energy prices would go down. But with no easy diplomatic solution in view, experts say it is hard to be optimistic.