Crude oil prices are heading towards the $100 per barrel barrier. The situation in Ukraine is playing a major role in driving prices up, but many other factors are at play as well.
Russia’s Potential Ukraine Invasion Can Push Oil Prices to $100 per Barrel
Currently, the Russia-Ukraine standoff is the main catalyst for rising crude oil prices. Other factors are also into play to push oil prices into the $100 per barrel territory. Plus, a likely nuclear deal with Iran can also further complicate the situation.
Ukraine's fears of war remain the biggest factor in higher oil prices. Last Tuesday, Brent crude prices surged to $99.50 after Russia sent troops to separatist regions within Ukraine. As the US and Europe continue to debate on the official definition of ”invasion,” the countries began calling for sanctions.
In addition, a Ukraine invasion will also impact the world’s energy markets. Russia is among the world’s largest producers of oil and natural gas at 12% and 17% of global production respectively. Further complicating the matter is Russia’s gas exports to Europe. A sizable quantity passes through pipelines that cross into Ukrainian territory. An invasion or outright war can shut down these pipelines immediately.
US and Europe Sanctions Russia
Another factor that can drive oil prices to $100 per barrel is the sanctions that the US and Europe will subject to Russia. If Russia continues its foray into Ukrainian territory, the Biden White House will add more sanctions to the growing list.
Meanwhile, Russia can hit back by reducing its oil and gas exports as retaliation. The Biden administration has noticeably avoided targeting Russia’s energy exports. Meanwhile, foreign policy experts said that the US and the EU should continue applying the sanctions pressure. They should do so to deter Russia even if the sanctions create a negative global effect.
Biden’s Sanctions Will Hit American Fuel Prices
Gas prices in the US remain high due to high inflation. This is one of the reasons why the Biden administration remains reluctant to hit Russia’s energy exports. They fear that Russia might retaliate by reducing their supply of oil and gas exports. If this happens, oil prices can surge beyond $100 per barrel due to lower supply. In fact, some Wall Street analysts expect oil prices to hit a $150 high.
As a result, some analysts believe that oil prices will remain high and push gas prices to $7 per gallon. Currently, US gas prices are hovering at the $3.50 level on average. If the Russia-Ukraine conflict escalates, or Russia retaliates against sanctions, analysts foresee crude prices to rise to $150 per barrel.
OPEC Also Keeping Supplies Low and Prices High
Additionally, the mismatch between oil supply and demand is pushing prices to new highs. With the pandemic slowing down, demand for oil continues to pick up as more businesses reopen. However, production remains stagnant at pandemic rates. The Organization of Petroleum Exporting Countries and its satellite members (OPEC+) cut production rates in 2020 due to falling demand. However, the cartel responded slowly to growing demand and instead chose to keep production levels steady. So far, OPEC and its satellite members are only agreeing to smaller incremental increases in supply.
Additionally, some OPEC+ members remain unable to produce the required allocation per month. Many oil production facilities are finding it more difficult to resume production. Lack of available workers and supply chain problems add up to a very difficult spring this year.
Watch the France 24 English video report reporting that oil prices surge towards $100/barrel on Russia tensions
Do you agree that crude oil prices will hit $100 per barrel in the next few days? Will this deter you from using your car too much? In addition, do you also foresee a $7 per gallon scenario in the US soon?
Let us know what you think. Share your thoughts below.
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