A sign shows gas prices at a Shell terminal in San Francisco on Feb. 23. Gas prices could rise further as crude oil prices rise following Russia’s invasion of Ukraine.
Justin Sullivan / Getty Images
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A sign shows gas prices at a Shell terminal in San Francisco on Feb. 23. Gas prices could rise further as crude oil prices rise following Russia’s invasion of Ukraine.
Justin Sullivan / Getty Images
Global oil prices rose above $100 a barrel on Thursday after Russia launched its invasion of Ukraine, hitting triple digits for the first time since 2014.
The price of energy is was relatively high prior to this crisis, as manufacturing activity failed to keep pace with surging demand from the global economy recovering from the pandemic.
Russia’s missile attacks on cities across Ukraine, including the capital, Kyiv, have raised those prices even further, which is sure to reinforce inflation concerns.
Brent crude – the global benchmark for oil prices – jumped as high as $105.79 for the contract for delivery last month.
Natural gas prices also escalated; In Europe, the price of natural gas has increased by 30%.
Russia is one of the world’s leading producers and exporters of crude oil and natural gas. Investors are concerned that some exports could be disrupted by conflicts on the ground, while others could be embargoed or shut down by Russia as a strategic move against Europe. Europe.
The United States has yet to issue direct sanctions on Russia’s oil and gas exports, but acknowledges that other sanctions against Russia will affect global energy supplies and prices.
“Defending freedom will come at a cost,” President Biden said in a speech this week, vowing to protect Americans from feeling the pain of being pumped with gas.
Ukrainian troops patrol at the front line outside the town of Novoluhanske, eastern Ukraine, February 19.
Aris Messinis / AFP via Getty Images
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Aris Messinis / AFP via Getty Images
Ukrainian troops patrol at the front line outside the town of Novoluhanske, eastern Ukraine, February 19.
Aris Messinis / AFP via Getty Images
Oil prices soar at a time of high inflation
Higher crude oil prices are likely to lead to higher gasoline prices – just as the US is suffering from its highest inflation in four decades.
High gasoline prices may contribute to inflation in the short term, hurting the pockets of many people. Increased shipping and manufacturing costs can also make goods more expensive.
There are other effects. A sharp increase in crude oil prices will benefit oil producers, while creating complex consequences international relations and combating climate change.
This is the first time crude oil prices have crossed the $100 threshold since 2014.
Brent crude oil hit an all-time high in July 2008, surpassing $147 per barrel before falling later that year. From 2011 to 2014, the price remained above $100 for a long time.
Oil markets are closely watching any major swings that could push prices back – including a significant de-escalation of tensions in Ukraine or a new coronavirus variant that could push global demand down.
But the most likely source of short-term downside would be any news about a new nuclear deal with Irana major oil producer currently under US sanctions.
The signing of a deal would potentially bring a significant amount of crude into the global market, alleviating supply concerns.
