The 27-country European Union has approved a ban that will reduce its Russian oil imports by some 90% by the end of the year in a move that will cost Russia billions of dollars and could impact the country’s ability to finance its invasion of Ukraine. But the ban is also set to drive up already record-high fuel prices across Europe and the U.S.

And, the decision is likely to remake the global energy sector as Europe, which relies on Russia for about 25% of its oil needs, looks elsewhere for reliable suppliers.

A ban, but only sort of: The ban applies to all Russian oil delivered by sea, but it contains a temporary exemption for oil delivered by the Russian Druzhba pipeline to certain landlocked countries in Central Europe. Germany and Poland have agreed to stop using oil from the northern branch of the pipeline.

Russian oil delivered by sea accounts for two-thirds of the EU’s oil imports from Moscow.

The EU is also a major customer of Russian natural gas exports and relies on the country for about 40% of its gas supply, used for everything from generating electricity to heating homes. But the EU has no current plans to extend the ban to Russian natural gas exports.

“Russian oil is much easier to compensate ... gas is completely different, which is why a gas embargo will not be an issue in the next sanctions package,” said Austria’s Chancellor Karl Nehammer.

Russia has the world’s largest natural gas reserves and is the biggest global exporter, according to the International Energy Agency.

Ban will fuel global price increases: Europe, the United States and much of the rest of the world could suffer because oil prices, which have been marching higher for months, could climb further as Europe buys energy from more distant suppliers, according to the New York Times. European companies will have to scour the world for the grades of oil that their refineries can process as easily as Russian oil. There could even be sporadic shortages of certain fuels like diesel, which is crucial for trucks and agricultural equipment.

In effect, Europe is trading one unpredictable oil supplier — Russia — for unstable exporters in the Middle East.

Even though the EU ban, which will be implemented in phases, won’t begin taking effect for months, wholesale oil prices continued to surge and pump prices across the U.S. advanced, again, into record-setting territory.

On Thursday, AAA reported the average price of a gallon of regular across the U.S. clocked in at an all-time high of $4.72, up almost $1.70 per gallon from this time a year ago.

Utah prices also set a new all-time benchmark on Thursday, according to AAA data, and now stand at $4.79 per gallon of regular, on average, across the state. The current average price for gas in Utah is up $1.43 per gallon over the past year.

Mark Klingbail, Basecamper Vans business associate, watches the price and gallons numbers tick up as he fills up a Basecamper Vans vehicle at Shopper’s Express in Salt Lake City on Thursday, June 2, 2022. | Kristin Murphy, Deseret News

Will the ban really hurt Russia? Moscow is waging a hugely expensive war in Ukraine. Oil and gas exports go a long way to footing the bill. Last year they accounted for 45% of the federal budget, the International Energy Agency says.

Europe is Russia’s main energy customer, and once the 27 countries have stopped using its supplies, they may not go back.

Short term, the oil ban will likely not hurt Russia too much amid high oil prices that mean Moscow can sell at a discount to clients in Asia and still make a profit, said Chris Weafer, CEO at Macro-Advisory Ltd., a consulting firm. “The financial pain for Russia probably will come more next year or over the next couple of years if it still has to offer discounts,” Weafer told The Associated Press.

Lucia van Geuns, an energy expert from The Hague Centre for Security Studies said Moscow’s decision to cut off gas to European customers also will likely hurt Russia in the long term “because they are going to lose a large client and of course Europe is their biggest client as far as gas is concerned.”

A global reshuffle: Ultimately, Western leaders are aiming to weaken President Vladimir Putin’s ability to wreak havoc in Ukraine and elsewhere by denying him billions of dollars in energy sales, according to The New York Times. They hope their moves will force Russian oil producers to shut down wells because the country does not have many places to store oil while it lines up new buyers. But the effort is perilous and could fail. If oil prices rise substantially, Russia’s overall oil revenue may not fall much.

The Times reports other oil producers like Saudi Arabia and Western oil companies like Exxon Mobil, BP, Shell and Chevron stand to do well simply because oil prices are higher. The flip side is that global consumers and businesses will have to pay more for every gallon of fuel and goods shipped in trucks and trains.

“It’s a historic, big deal,” said Robert McNally, an energy adviser to former President George W. Bush. “This will reshape not only commercial relationships but political and geopolitical ones as well.”

Contributing: Associated Press