Putin’s threats against Ukraine could reinvigorate the U.S. oil and

Russian President Vladimir Putin has long made it clear that he is no fan of U.S. shale drilling. But, if he invades Ukraine, he may unwillingly help bring back the American industry.

Like other global producers, the U.S. industry was crushed by the pandemic in early 2020. Oil prices crashed, and prices for crude futures even turned negative on the CME for a brief time. An extremely chastened U.S. industry re-emerged, with executives more cautious than ever about throwing money down oil wells and angering shareholders.

The U.S. industry has been making a slow comeback, helped by rising oil prices, which are up more than 50% in the last year. Putin’s threats against Ukraine have helped drive an already rising oil price well above $90 per barrel to a seven-year high, with nearly 30% of that price rise since the start of the year.

“The last thing they wanted to do was provide a price incentive for a rebound in U.S. oil and gas production,” said Dan Yergin, vice chairman of IHS Markit. “They now succeeded in driving up prices, which is strengthening U.S. oil and gas production.”

Russia has historically been the largest provider of both oil and natural gas to Europe, and the U.S. has long warned that its control of critical energy sources could prove to be a hazard for European consumers. Yergin said Putin has been a strong opponent of U.S. shale, and as far back as 2013, the Russian president told a public forum in St. Petersburg that shale was a grave threat.

Tense situation

President Joe Biden said Tuesday that the U.S. and Russia would continue to use diplomatic channels to avoid a military outcome, but warned the situation remains uncertain. Russia announced Tuesday it was pulling back some of its more than 100,000 troops on the Ukraine border. By Wednesday, however, NATO said Russia instead was increasing its troops.

Oil rose Wednesday, with West Texas Intermediate futures for March up 2.6%, at about $94.50 per barrel in afternoon trading.

“The geopolitics of energy is back with full fury,” Yergin said.

Energy is clearly at the center of the conflict. European natural gas prices have been flaring all winter on concerns about short supply. First, the region was unable to put enough natural gas into storage. Then, Russia cut back some supply starting in the fall.

Russia sends natural gas to Europe via pipelines running through Ukraine and others, including Nord Stream I. The Nord Stream II pipeline — built to bring gas from Russia to Germany — is finished but still awaiting German approval.

Biden repeated Tuesday that if Russia invades Ukraine, that pipeline will not be allowed to operate.

Should Russia invade, the U.S. and its allies plan on imposing sanctions on the country, and analysts say a worst-case scenario for energy supplies would be either that the sanctions block Russian energy sales to Europe…