Hawaiians, more than residents of any other state, will likely see higher gasoline and energy costs due to Russia’s Ukraine war and the resulting soaring oil prices.
“Isolated by the Pacific Ocean, Hawaii is the most petroleum-dependent U.S. state,” notes the U.S. Energy Information Administration.
Overall, the U.S. consumes very little Russian oil. In 2021, oil from that country represented just 3% percent of total U.S. crude imports and just 1% of the oil processed by U.S. refineries, according to the American Fuel and Petrochemical Manufacturers (AFPM) trade association.
But Hawaii is an anomaly among U.S. states. It imports several million barrels of Russian crude oil annually, accounting for 10% to 25% of Russian crude shipments to the U.S. depending on the year.
Soaring oil prices—the benchmark Brent and U.S. crude futures are up over 15% since Russia invaded neighboring Ukraine last week, touching at least 10-year highs—come at a particularly inconvenient time for the island state. Its coal-powered AES electrical plant in West Oahu, the biggest plant on its most populated island, is set to shutter in September 2022.
The renewable energy projects meant to replace it face a number of delays and setbacks. Oil plants are part of the fallback plan to keep the lights on for Oahu residents until those setbacks are sorted out.
“We have warned about leaving the cost of this transition up to world oil markets, and this week’s events are another reminder of the price we pay for oil dependence,” Jay Griffin, chair of the Hawaii Public Utilities Commission, told Canary Media last Friday.
Today, Par Pacific, the largest operating refinery in Hawaii, announced that it would stop buying Russian crude oil for its Kapolei refinery “in light of recent geopolitical events.” “The geopolitical landscape and energy markets are dynamic. We will continually monitor and evaluate our posture on Russian crude over the coming weeks and months,” the company said in a statement.
Par Pacific added that it will look to South America and Canada to help meet fuel production requirements and “work closely with our customers and partners in state government to make prudent decisions in support of energy assurance for Hawaii.”
Under Hawaii’s utility regulations, the cost of fuel is passed on to customers. That means Hawaiians could soon see a significant increase in their energy bills.
One reason Hawaii relies so heavily on Russian crude oil is because of the 1920 Jones Act, a law that says cargo sent by sea between U.S. ports must travel on ships that are built, owned, and staffed by Americans. Those shipments are very expensive, and so to cut down on costs, large Hawaiian refineries tend to import their oil from abroad.
The Russian invasion of Ukraine has led the United States and its European allies to impose severe economic penalties on Russia. But oil is not among the targets, with the Biden administration saying there is no “strategic interest” in further disrupting the global energy supply.
“We don’t have a strategic interest in reducing the global supply of energy,” deputy press secretary Karine Jean-Pierre told reporters aboard Air Force One on Thursday. Those sanctions, she said, “would raise prices at the gas pump for Americans,” which the White House is “very aware of.”
But oil prices are up, nevertheless, due to uncertainties caused by the Ukraine war and potential supply shocks in Europe, which is more dependent on Russian oil. Higher gasoline prices are already hitting consumers’ wallets hard across the U.S.
This story was originally featured on Fortune.com
