Will Oil Jump To $100?
Immediately after Russia invaded Ukraine, the price of crude rose to $110 in early June 2022, up from $61 in late 2021. Troubling geopolitical forces suggest that another spike in crude prices may be coming.
Cheap Oil –The Rise Of Shale
Tensions in Russia and the Middle East have started to lift crude prices. Drones from Ukraine have hit several critical Russian oil facilities. Russia is among the largest oil producers in the world.
Rebels And Oil Supply Problems
Houthi rebels continue to attack ships in the Red Sea, and shipping companies have sent many of the ships on routes to avoid the Suez Canal. This can add over ten days to the time it takes to get these ships, including oil tankers, to their destinations. Hiroyuki Kikukawa, president of NS Trading, a unit of Nissan Securities, commented to Reuters, “Escalating geopolitical tension, coupled with a rise in attacks on energy facilities in Russia and Ukraine, alongside receding ceasefire hopes in the Middle East, raised concern over global oil supply.”
These are legitimate concerns. This year, crude prices have risen from $72 in mid-January to $80 today. While some of the increase is due to rising demand, anxiety over world events is a contributor.
Oil prices at $100 are a significant threat to the US economy. In June 2022, the average price for a regular gallon of gas hit $5. Heating oil prices also jumped, as did diesel. American households and commercial ventures were threatened with an unexpected cost they were not equipped to handle. That, in turn, is a possible cause for an economic slowdown.
