Gas prices are skyrocketing as the global energy crisis worsens

The energy demand is back today, as the world economy reopens – but supply has simply not kept up. Therefore US oil prices have skyrocketed $ 120 since crashed to negative $ 40 per. Barrel in April 2020. US oil prices ended above $ 80 per barrel. Barrel on Monday for the first time in almost seven years.

Crude oil rose 1.5% to end the day at $ 80.52. The last time oil closed above $ 80 was October 31, 2014.

All this leads to sticker shock for many americans filling at the pump – at a time of year when gas prices typically cool down. The national average price of gasoline hit a new seven-year high of $ 3.27 a day on Monday, up 7 cents in the past week alone. according to AAA. Gas has almost doubled since hitting $ 1.77 in April 2020.

High gas prices will only exacerbate rising inflation, squeeze the budgets of American families and hurt President Joe Biden’s political fortunes.

Unfortunately, the prices of the pump can be lifted even higher by global energy crisis.
Natural gas prices have risen so much in the airespecially in Europe and Asia, that power plants and factories can increasingly turn to a relatively cheaper fuel source for electricity: crude oil.

“It’s a case of just trying to keep the light on,” said Matt Smith, Kpler’s leading oil analyst in America. “This essentially creates demand that is typically not there,”

$ 100 oil in the cards?

Citigroup on Monday raised its Brent oil forecast to $ 85 per barrel. Barrel in the fourth quarter and said crude oil is likely to hit $ 90 at times. The Wall Street bank cited “price contagion this winter” and the expected shift of power plants away from soaring natural gas to oil.

Citi added that a “very cold winter” could cause Europe to run out of gas in February.

Oil has long been there as a potential substitute for natural gas – except until recently, it made no economic sense. This is because for much of the last dozen years, natural gas prices have been very low, making the switch to oil uneconomical.

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But in Europe, natural gas prices has gone from under $ 2 per. million BTU last year to as much as $ 55 this fall. That equates to $ 320 per barrel of oil.

Bank of America has warned that a cold winter could increase demand for oil by half a million barrels a day and lift Brent crude to $ 100 a barrel. Barrel. That, in turn, would cause more sticker shocks for U.S. motorists because gas prices are priced based on Brent crude oil.

“We may be just a storm away from the next macro hurricane,” Bank of America strategists wrote in a recent note to customers.

Record coal prices in China

It is not only high natural gas prices that play a role here.

Chinese coal prices have reached record highs amid floods in northern China that forced the closure of dozens of coal mines. Coal remains the main energy source in China used for heating, electricity generation and steelmaking. China is now struggling with lack of power, causes the government to ration electricity during peak hours and some countries to suspend production.
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Against this background, petrol prices have crept higher and higher in the US – increasing inflationary pressures gripping the economy.

Patrick De Haan, head of petroleum analysis at GasBuddy, said $ 3.30 gas prices nationally are likely around the corner.

“When you look at the horizon, I really don’t see an organized price drop,” De Haan said. “The market is starting to feel explosive. Basically, it’s there for it to continue.”

OPEC in the driver ‘s seat

Although demand is high, oil supply has simply not kept pace.

US oil production has been slow to recover from Covid – although prices have risen. Many U.S. oil companies are happy to once again oversupply the market, and they are far more focused on returning cash to shareholders who have lost large amounts of money over the past decade.

Despite calls by the White House on OPEC and its allies to significantly increase production, the group has only gradually increased production from the sidelines in early 2020. For now, they seem to keep oil prices rising.

“They’ve always been the swing producer,” Kplers Smith said, “but my God, they’re definitely in power right now.”

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