Oil is Putin’s most valuable weapon in his invasion of Ukraine

Yahoo Finance's Rick Newman discusses how Russian oil is fueling Putin's invasion of Ukraine and the outlook for the war as EU bans most oil imports.

Video Transcript

DAVE BRIGGS: And let's talk gas now, another record high at the pump today, as the average gallon of gas reaches $4.71. That's up $0.52 in just a month. But there was some good news in that regard in that OPEC and its oil producing allies, OPEC+, have agreed to hike output this summer. Yahoo Finance senior columnist Rick Newman here with more on Russian oil and how Vladimir Putin actually has a valuable weapon in oil. It has nothing to do with military arsenal, but how valuable is oil to Putin?

RICK NEWMAN: It's crucial, and he's getting so much revenue from oil, despite all the sanctions that the United States and European nations and other nations have put on that, in April and March, they had record oil revenues. Sales are down a little bit, but because the price is up, Russia is, honestly, just raking in cash. And of course, this means they've got plenty of money to keep the fight going in Ukraine. And this is not pinching Putin the way many nations allied with Ukraine want to do.

SEANA SMITH: Rick, so since then, though, we know that the EU has-- is phasing in a partial ban, though, of Russian oil. I guess the question is, if EU isn't buying that oil, is that going to be a big hit for Russia down the line? Or are they going to find somebody else to simply buy it?

RICK NEWMAN: It depends if Russia is able to find other buyers. And they probably will be able to. Just to give a quick overview, Seana, of what we know about the sanctions so far, they've been in place for about three months now. They seem to be having a real serious effect on what you might call Russia's consumer economy. Because they're shut off from so many overseas products and components they need, even when they build their own products, things like car production and airplane production have practically stopped. And you almost cannot even buy a new car in Russia at this point.

But in terms of the revenue that the Kremlin gets from oil and gas, which is its biggest source of revenue, as we just discussed, that money keeps coming in. So the problem here, of course, is that for this to actually have an effect, such as this European ban to actually work, it means that Russia has to be unable to sell its oil anywhere. And Russia is the third largest oil producer in the world. And if you took even half of its production off the global market, you'd see oil and gas prices skyrocket here and in Europe and all around the world, even more than they have already.

So for this phased in ban on European purchases of Russian oil to work, it almost, by definition, means we have to have higher oil and gas prices. So I think that's quite a worry for consumers here. I think that gas prices, honestly, are going to go above $5. And I don't think $6 is out of the question.

DAVE BRIGGS: Well, helping Russia skirt these sanctions, in particular, is India, who's now buying 800,000 barrels of oil a day. That's compared to 30,000 prior to their invasion of the Ukraine. And some of that oil arrived in the United States just a couple of months ago. That is a big problem we have to solve. Rick Newman, thank you, sir.