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Why a reduction in oil and gas from Russia will be felt in Colorado

Even though oil and gas is produced in Colorado, gas prices are based on the price of a barrel of oil. Russia's involvement in war will create a ripple effect.

DENVER — The state pension fund will divest millions worth of investments in Russian-owned assets. Colorado Public Employees Retirement Association (PERA) has about $8 million invested in five Russian companies.

It will divest $7.2 million of that because of federal sanctions on Russian banks.

PERA's entire portfolio is more than $61 billion.

That pension fund will not be the only account in Colorado feeling the effects of the Russian invasion of Ukraine.

Gas prices are expected to go up, costing everyone a little more.

Even with oil and gas produced in Colorado and nearby states, any reduction in the oil and gas coming from Russia will be felt everywhere.

"A quarter of Europe's oil comes from Russia. I think 40% of European gas comes from Russia. To the extent that there are restrictions in those supplies coming from Russia, that means that energy supplies overall around the world are going to be constricted, and that's what could feed into higher fuel prices for Americans in the short-term," said Rachel Epstein, professor of International Relations and European Politics at the University of Denver's Josef Korbel School of International Studies.

Even though oil and gas are produced in Colorado, gas prices are based on the price of a barrel of oil.

"These are global commodities. Oil trades on a global scale, so when you see that instability, you will begin to experience that here at the gas pump and the cost for heating our homes," said Dan Haley, president of the Colorado Oil and Gas Association. "When there's any kind of instability like that, you'll see ripples across the economy."

Added Lynn Granger, executive director of American Petroleum Institute Colorado: "Even before this conflict, we were already expecting demand to outpace supply because of the downturn with COVID, because of the Russia-Saudi price war that occurred in March of 2020. Our economy and our industry is still in recovery mode."

Granger spent time in Ukraine in the U.S. Army, including after Russia invaded Crimea in 2014,

"I've really seen, firsthand, what it means to be dependent on another nation for your energy resources, and it's very real and it's very scary when things like this happen," said Granger.

"When you produce energy closer to home, it's easier to keep those costs lower," said Haley.

When a major exporter of oil and gas is mired in war, like Russia, the ripple will be felt regardless of where we get our energy.

"It also means, potentially, for U.S. energy producers that there's more opportunities to export U.S. energy globally, which could ultimately be an upside, but I think in the short term, people can expect to pay more for energy," said Epstein. "It's possible that what will happen as a consequence of this crisis and restricted access to energy resources globally, that, in fact, it does create more opportunity for American producers of oil and gas. In the medium to longer term, they may realize higher prices for their products."

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