The U.S. crude oil benchmark dropped 6% to $96.84 Tuesday, from almost $130 per barrel last week. This is its highest level since 2008. According to UBS, oil prices are dropping as leaders from Russia and Ukraine discuss a ceasefire.
UBS analysts stated that the move “reflects easing fears about further supply disruptions based upon ceasefire talks between Russia, Ukraine” in a report. There were indications that Indian oil companies have bought discounted Russian crude oil. This could mitigate the impact of US, UK, and Canadian import bans.
According to Patrick De Haan (head of petroleum analysis at GasBuddy), gas prices are currently falling in several U.S. cities. The drop should be apparent soon at more U.S. service stations.
“It will only be a matter of time before we drop below $4/gal, as long as these levels remain constant.” Tweeted.
This would represent a significant drop from the average price of $4.32 per gallon Americans have paid over the past two weeks. It is up 84cs from a month ago according to GasBuddy. According to AAA, some states, such as Alaska and California, pay average prices of $4.73 and $5.75, respectively. Families in the United States are already struggling with rising inflation and have been further squeezed by higher prices.
Generally speaking, oil prices are in line with gas prices. As oil prices rise, so does the price at the pump.
In a Monday statement, AAA spokesperson Andrew Gross stated that oil costs account for approximately 50% of the price drivers pay at the pump. “This war is roiling an already tight international oil market and making determining if we are close to a peak for pump price or if they continue grinding higher difficult. Everything depends on oil prices’ direction.
In April 2020, gas prices dropped to an average $1.94 per gallons as the COVID-19 pandemic took hold. As the U.S. economy recovered and increased demand, fuel prices began to rise sharply in the fall. Gas had reached $3.40 by December 2021. Meanwhile, inflation was at its worst in over 40 years, pushing up everything, from food and rent to the highest levels ever recorded.
After Russia’s massed troops at the Ukraine border, oil and gas prices continued to rise this year. After Russia’s February 24th invasion, prices soared amid fears that the conflict could cause disruption to global crude supplies and lead to economic sanctions.
The U.S. declared a ban for Russian oil imports. This caused prices to rise further. Russia is a major oil exporter and accounts for approximately 12% of world’s crude oil supply. Any disruption in these exports will likely drive gas prices up for almost all consumers.
Despite the pain at gas pumps, 63% of Americans voted for the Biden administration’s sanctions against Russia. This includes the ban on Russian oil.
