Today, oil prices are lower than they were at the start of the war, having fallen more than 30% in just two months. On Monday, news of a slowing Chinese economy and lower Chinese interest rates pushed prices down further, to less than $90 a barrel for the US benchmark.
Gasoline prices have fallen every day for the past nine weeks, to an average of less than $4 nationwide, and jet fuel and diesel prices are also falling. This should translate into lower prices for things as diverse as food and plane tickets.
But it would be premature to rejoice. Energy prices can soar just as easily as they can drop unexpectedly and suddenly.
China, where COVID-19 lockdowns remain widespread, will eventually reopen its cities to more trade and traffic, which will increase demand. Oil withdrawals from the United States Strategic Petroleum Reserve will end in November, and it will need to be replenished. And a single unexpected event — say, a hurricane flooding the Houston Ship Channel and knocking out several Gulf of Mexico refineries for weeks or even months — could drive fuel prices up.
This kind of disaster could send tidal waves through the US and even global economy since energy prices are fundamental to the prices of everything that is shipped and produced, whether grain or of building materials.
“Oil prices always have the ability to surprise,” said Daniel Yergin, energy historian and author of “The New Map: Energy, Climate and the Clash of Nations.”
Prices could fall further if Iran agrees to a new draft nuclear deal, opening a potential tap of at least 1 million additional barrels per day of Iranian oil exports.
Predicting energy prices has always been a fool’s game because there are so many factors, including the expectations of traders who buy and sell fuel, the political fortunes of unstable producing countries like Venezuela, Nigeria and Libya, and the investment decisions of public and private oil companies. business leaders.
Today, these complexities are particularly difficult to assess.
This article originally appeared in The New York Times.
Today, oil prices are lower than they were at the start of the war, having fallen more than 30% in just two months. On Monday, news of a slowing Chinese economy and lower Chinese interest rates pushed prices down further, to less than $90 a barrel for the US benchmark.
Gasoline prices have fallen every day for the past nine weeks, to an average of less than $4 nationwide, and jet fuel and diesel prices are also falling. This should translate into lower prices for things as diverse as food and plane tickets.
But it would be premature to rejoice. Energy prices can soar just as easily as they can drop unexpectedly and suddenly.
China, where COVID-19 lockdowns remain widespread, will eventually reopen its cities to more trade and traffic, which will increase demand. Oil withdrawals from the United States Strategic Petroleum Reserve will end in November, and it will need to be replenished. And a single unexpected event — say, a hurricane flooding the Houston Ship Channel and knocking out several Gulf of Mexico refineries for weeks or even months — could drive fuel prices up.
This kind of disaster could send tidal waves through the US and even global economy since energy prices are fundamental to the prices of everything that is shipped and produced, whether grain or of building materials.
“Oil prices always have the ability to surprise,” said Daniel Yergin, energy historian and author of “The New Map: Energy, Climate and the Clash of Nations.”
Prices could fall further if Iran agrees to a new draft nuclear deal, opening a potential tap of at least 1 million additional barrels per day of Iranian oil exports.
Predicting energy prices has always been a fool’s game because there are so many factors, including the expectations of traders who buy and sell fuel, the political fortunes of unstable producing countries like Venezuela, Nigeria and Libya, and the investment decisions of public and private oil companies. business leaders.
Today, these complexities are particularly difficult to assess.
This article originally appeared in The New York Times.