Why Oil Prices Are Suddenly Plummeting
This article is more than 2 years old
Oil prices have dropped to the lowest price they have been all year, and consumers are rejoicing at the price drop. Finally, an essential service is reducing instead of vastly increasing. But economists are worried that the American economy is still unstable amid the new sanctions opposed to Russia’s economy.
The drop in oil prices is good for American citizens as the gas available for automobiles will continue to reduce—what a gift for the holidays. In March this year, US oil increased to $130 a barrel due to the start of the Ukrainian war. It has continued to plummet to $74.25 a barrel as of this week. The world benchmark in oil prices, Brent crude, also decreased in price to $79.90 a barrel.
This reduction in oil prices could be due to the West imposing a range of new sanctions on Russian energy. But it does not appear to have significantly affected global energy markets. The European Union banned Seaborne oil from Russia this week while the West placed a $60 a barrel cap on the Russian export. These sanctions and bans are to try and hurt the Russian economy and reduce Russia’s ability to continue to invade Ukraine. If they have considerably less money, they will not be able to continue their war efforts.
Even though major world powers have placed sanctions on Russia’s energy, they still have oil on the market and are willing to continue business for now. Economists are relieved that the price cap was not lower, as it could insult Russia, and they may cut their supply altogether. All these new revelations in the energy markets are making global consumers very happy. Finally, there is some relief from the energy and cost of living crisis.
The national gasoline price has dropped another two cents this week. This drop will bring the total price drop to fourteen cents in the past week and forty-two cents in the last month. The national average price of gasoline, $3.36 a gallon, is nearly equivalent to the gasoline costs last year.
Even though energy prices are starting to drop, the Organisation of the Petroleum Exporting Countries (OPEC+) is not changing its plans and is going ahead with oil production cuts. Financial experts are concerned that a recession could still be on the cards as the stock market also saw a sharp dip this week. There have been numerous days of losses over the last number of weeks, which shows how volatile it still is.
Some economists are concerned that interest rates may increase to 5% as the Federal Reserve becomes more aggressive in reducing inflation rates. This increase is due to worrying reports on employment, supply orders, and the service sector.
It has been a challenging year for everyone, with inflation increasing all the essential and non-essential products and services in our lives. A Christmas miracle has happened, and gas prices have begun to drop, leaving customers with a few extra cents in their pockets. But more than that, they are now filled with hope for 2023 that maybe the hard times are over.
