Oil Prices Continue to Rise and will Skyrocket; if Russia Invades Ukraine

By Yehudit Garmaise

President Joe Biden said on Nov. 23 that his strategy to release 50 million barrels of oil from the Strategic Petroleum Reserve would lower gas prices and increase the supply of oil, however, many say the president’s move has not made much of a difference.

 

In fact, the president has been urging the Organization of the Petroleum Exporting Countries (OPEC) to pump more oil, as several countries have been falling short of their monthly production quotas, the New York Times reported.

In January alone, crude oil prices rose more than 15%, and the global benchmark price for oil, which dropped to zero for the first time ever during the pandemic, when most people were not getting out much, reached the high price of $90 per barrel, as Americans clamored to get out after lockdowns and quarantines.

As consumers’ demand for oil continues to far outpace its supply, many energy analysts predict that oil could soon be priced at $100 a barrel, which means that Exxon Mobil and other oil companies are bringing in record profits.

For consumers, however, the average price for regular gasoline has almost reached $3.40 a gallon, which is approximately a dollar higher than it was a year ago, the American Automobile Association reported.

Why is the supply of oil so low?

First, investors and environmental activists have pressured Western oil companies to drill fewer wells to decrease the supply, to keep prices high and to decrease Americans’ dependence on fossil fuels, respectively.

Secondly, natural disasters and political turbulence in recent months in the oil-producing countries of Ecuador, Kazakhstan and Libya have curbed their production of oil.

Third, “the oil market is on edge,” said Ben Cahill, a senior fellow at the Center for Strategic and International Studies in Washington, as the world fears the potential Ukranian invasion by Russia, which produces 10 million barrels of oil a day.

Although America, which only receives 700,000 barrels of a day of Russian oil, would not be much affected if oil exports from Russia stopped, the supply chain of oil would be disrupted to the rest of the world, particularly Europe.

In addition, the US and its allies might impose sanctions on Russia that could reduce its oil production and force many countries to rely on other energy sources, such as natural gas.

Electric cars, which are growing in popularity worldwide, could be one solution.

High oil prices, however, cannot stay high forever: as the high prices will likely suppress consumers’ demand, which would cause oil prices to come back down.