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On Tuesday, in the wake of Russia’s invasion of Ukraine, oil prices surged to their highest level since 2014, which could trigger the high price of gasoline in the United States to soar even higher.
“The international oil benchmark rose 2.6 per cent to $97.84, as traders calculated the possibility of disrupted supply from Russia after Putin directed his military to enter Ukraine’s rebel-held Donetsk and Luhansk regions,” Financial Times stated.
“The price of Brent crude, the international benchmark, neared the $100-a-barrel mark on Tuesday before easing off to about $97 a barrel, a 2 percent increase. West Texas Intermediate was trading at nearly $94.00 a barrel, up about 3 percent,” The New York Times reported.
The last time crude oil prices reached such a high level was in 2008, when the price of a barrel of oil reached $147 and gasoline soared to $4.09 a gallon.
Tamas Varga of oil broker PVM surmised, “The potential for a rally over $100 a barrel has received an enormous boost. Those who have bet on such a move anticipated the escalation of the conflict,” The Daily Mail noted. Julius Baer analyst Norbert Rücker echoed, “Given the prevailing mood, oil prices may very likely climb into the triple digits in the near term.”
After Ukrainian President Volodymyr Zelensky demanded an immediate halt to the Nord Stream 2 project from Russia, German Chancellor Olaf Scholz said Tuesday that his country would stop the certification of the pipeline, asserting, “Now it’s up to the international community to react to this one-sided, incomprehensible and unjustified action by the Russian president,” adding that it necessary to “send a clear signal to Moscow that such actions won’t remain without consequences,” the Associated Press reported.
“Crude oil prices have determined at least half of the price of each gallon of gas over the last decade,” The Balance explains. “As oil prices change daily, gas prices are constantly fluctuating, too. The rest of the price of gas is based on refinery and distribution costs, corporate profits, and state and federal taxes. In December 2021, around 53% of the total price of regular gasoline was the price of crude oil. … West Texas Intermediate is crude oil used as a benchmark in U.S. oil pricing. Based on this benchmark, crude oil prices have risen and fallen dramatically multiple times since the 2008 financial crisis.”
Energy Word founder Dan Dicker told Yahoo! Finance Live last week, “My guess is that you are going to see $5 a gallon at any triple-digit [oil prices] … as soon as you get to $100. … And you might get to $6.50 or $7.”
Bastien Drut, chief thematic macro strategist at CPR Asset Management commented, “One of the very few definitive things we can see from this crisis is that energy prices are going higher. Even if there is no further escalation in Ukraine, the main consequence is still going to be higher inflation.”
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