The world was already grappling with the worst inflation in decades and soaring energy prices as we headed into 2022. Of course, both situations have only gotten worse with Russia's invasion of Ukraine.

Although the U.S. is not willing to send in ground troops or provide air support, it's backing the Ukrainians and putting crippling sanctions on Russia. The latest step was President Joe Biden's decision to ban imports of Russian energy.

Currently, Russia is one of the largest energy producers in the world. It supplies 11% of crude oil production and provides a huge portion of Europe's energy needs via natural gas.

In his press conference, President Biden warned that the move could lead to further upward pressure on gas prices. So far, most polls are showing that Americans are willing to tolerate higher prices to combat the Russian incursion.

Some were surprised by the move as one of the biggest headaches for the administration is inflation and rising gas prices. Many European countries supported the move but are making an exception for energy imports given their economies' reliance on it.

The administration is reviewing multiple options to bring down oil prices. This includes resuming its negotiations with Iran and opening up dialogue with Venezuela. Both are petrostates under heavy sanctions which means they are selling at a discount to world markets. Similarly, Russian oil is selling for about $30-$40 below its market price.

Another interesting idea that has been proposed is that the U.S. release more of its special reserves to increase the supply. At the same time, the U.S. could buy futures contracts for crude oil which would also support future production. One reason that production hasn't increased as fast as prices are that futures contracts still haven't risen as much. This step would have the dual benefit of increasing near-term supply and increasing longer-term production.

The major takeaway is that we are in a new era of higher energy prices. The sanctions are not going to be relaxed until there is regime change or a shift in Russia's policy. There will be multiple secondary and tertiary effects that will only become clear in time, but one certainty is that domestic energy production will increase.