Oil prices have risen. Drivers pay more for fuel. That poses problems for folks heading to work, transporting the world’s goods, or harvesting fields. The increase also complicates the global fight against inflation—and feeds Russia’s money reserves.
A robust U.S. economy increases demand for oil. And greater demand increases the price. U.S. pump prices are still well below summer 2022’s record nationwide average of $5 per gallon. But they’re up 15 cents from a year ago.
Oil costs keep gas prices high even with plentiful gasoline stocks and decreased driving demand.
Diesel prices rose as well. Refineries face shortages of the kinds of crude oil best for making diesel. Some refineries are also producing jet fuel instead of diesel. They chase profits as air travel rebounds.
A short supply of diesel hurts farmers, who use a lot of that fuel. It also adds to the price of consumer goods transported by truck . . . which is pretty much everything.
Saudi Arabia’s decision to cut oil exports pushed oil prices higher. The world’s second-largest oil supplier slashed production by one million barrels per day since July. The kingdom decided in early September to extend the cut through the end of the year.
Jorge Leon, an energy research and analysis company executive, says the Saudis will review their cuts each month—and could add barrels back if prices spike too high.
“I don’t think it will be clever for the Saudis to push that hard,” Leon says. “That’s going to kill economic growth, and lower growth is going to mean lower oil demand at the end of the day.”
Critics want U.S. President Joe Biden to encourage more oil drilling and scrap his support for electric vehicles.
President Biden says he considers oil production essential to keep the economy going. But he also calls it a bridge to a future with EVs and renewable energy.
Meanwhile, more Iranian oil may come on the market. That could happen as the United States “turns a blind eye” to enforcing sanctions to keep prices from rising further, Leon says.
Oil is Russia’s main moneymaker. So the recent rise in oil prices could help Moscow earn “significantly more revenue from those exports,” says economist Benjamin Hilgenstock. That revenue could be as much as $17 billion this year and $33 billion next year.
Higher prices at pumps around the world could help the Kremlin pay for its invasion of Ukraine and withstand Western sanctions.
Russia lost some $100 billion in oil revenue following a European Union import ban and a $60-per-barrel price cap imposed by the Group of Seven major economies. The cap bars Western insurers and shippers from handling oil priced above that level.
Russia, however, has found ways around the cap. Its tactics including using a fleet of ghost tankers and masking the ownership of the vessels and the origin of the crude they carry.
