In late February — as the world faced the prospect of Russia invading Ukraine — oil prices rose to just under $100 a barrel. By March 7, 2022, Brent crude, the world oil benchmark, had reached $139.13, the highest in nearly 15 years, Deseret News reported. Said prices have put further strain upon an already struggling world economy.
The morning of March 15, however, brought some good news and potential relief. Oil benchmarks lost 8%, briefly touching below $100 a barrel for the first time since March 1. Brent crude lost 7% to hit $104.35.
Why Did Oil Prices Drop?
The dip appears to be sparked by a number of factors, including talks of a potential ceasefire between Russia and Ukraine. “Today’s action reflects a shift in sentiment in Russia/Ukraine causing sentiment traders to sell,” CIBC Private Wealth U.S. senior energy trader Rebecca Babin told CNBC. She further indicated China’s recent COVID-19 lockdowns and technical pressure as price factors, as well.
The shutdown in China due to another COVID-19 outbreak could reduce global energy demand, Reuters reported.
Will Gas Prices Drop?
But will U.S. drivers see relief at the pumps? Experts seem to believe so. Global head of energy analysis at the Oil Price Information Analysis, Tom Kloza, told CNN business that if prices stay around the $100 per barrel mark, we should see fuel prices drop by about 20 cents per gallon. On March 14, the national average for regular unleaded was $4.33 per gallon. A reduction of 20 cents would still leave us with $4.00-plus prices in some parts of the country.
Kloza said the relief might be temporary, however, with prices spiking again in the spring and summer as people begin traveling more. Indeed, the World Travel & Tourism Council is predicting a massive increase in domestic travel in the U.S. as winter ends. The WTTC is predicting a 6.2% increase over pre-pandemic travel levels within the U.S., contributing nearly $2 trillion to U.S. GDP.
Kloza said he expects the national average gas price to rise to roughly $4.50 per gallon this spring and summer. The rise in demand could be compounded by continuing sanctions on Russia — even if Russia and the Ukraine achieve a ceasefire — according to CNN.
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