Oil Moves Closer to $100 a Barrel — What Does It Mean for Gas Prices?
If you hoped gasoline prices would ease this year after spiking sharply in 2021, sorry, but it’s probably not gonna happen. A combination of tight oil markets and tensions involving Ukraine briefly pushed the price of Brent crude above $90 a barrel this week, leading to speculation that the price will eventually top $100 — and carry gas prices up with it.
Oil priced at $90 a barrel — its highest point in years — might be “only the beginning,” according to OilPrice.com. The price could tick much higher if Russia decides to invade Ukraine. Even if that doesn’t happen, fundamental problems that continue to limit the supply of oil will likely contribute to higher prices.
One of those problems is a decline in OPEC’s spare capacity, a development that prompted JPMorgan to recently warn that the price of Brent crude could reach $125 a barrel by the fourth quarter of 2022.
The inability or unwillingness of leading producers like OPEC and the United States to increase production has led to very tight oil supplies just as many of the world’s economies are trying to rebound from the COVID-19 pandemic.
“Given how tight markets are, oil certainly can rally above $100, particularly if OPEC+ supply increases continue to lag behind their target, U.S. producers fail to respond or if the Ukraine-Russia crisis worsens,” the Economist Intelligence Unit said in a statement reported by Reuters.
Meanwhile, ongoing global supply chain disruptions have also played a part in higher oil prices. Supply disruptions were cited as one of the reasons Goldman Sachs and Morgan Stanley recently forecast oil prices above $100, Reuters reported.
So how will all this affect prices at the pump? Look no farther than your nearest gas station. The national average gas price was $3.36 a gallon on Monday, up from $3.28 a month earlier and $2.42 the year before, according to AAA. However, that $3.36 probably looks like a bargain for residents of some states, mainly those in the West.
The nation’s most expensive market, California, had average gas prices of $4.64 a gallon on Monday. It was followed by Hawaii ($4.38), Washington ($3.95), Oregon ($3.92), Nevada ($3.80) and Alaska ($3.75), AAA reported.
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