Concerns over Implications of Rising Oil and Gas Prices
Oil prices have been on a steady climb for some time now, and they rose again on Tuesday in response to new measures by the United States. These measures aimed to cut down its oil supply as a result of significant losses recorded in the markets globally due to the devastating and far-reaching consequences of China’s Evergrande crisis. The property group is heavily indebted and has had a tremendously negative effect on the economy of China and global markets as well.
The price of Brent crude, a widely adopted benchmark for oil prices, increased by 0.7% to $74.44 per barrel after a bigger decline just 24 hours before. The WTI contract, which is set to come to an end on Tuesday, went up by 0.9 to $70.9 after a 2.3% decline.
In the state of Ohio, Hurricane Ida and Hurricane Nicholas have continued to affect gas prices, as Hurricane Nicholas came just a couple of weeks after Hurricane Ida. Together, they have had the effect of causing oil production to decline over time. Ohio gas prices have continued to rise due to the negative impact of the hurricanes on the supply of gasoline. The price per gallon of gas in Ohio this week is $3.102
Luckily though, gas prices tend to decline following Labor Day as demand often falls . This decline in demand caused by the change in season has had the positive effect of offsetting the increase in gas prices during the week. The problem is exacerbated by the offline status of the majority of refineries operating offshore in the Gulf of Mexico as production in the refineries has been hindered by the raging storms.
Only halfway into the hurricane season, at least 17 storms have been reported and named. As a result, the instability in the prices of gas isn’t expected to end anytime soon, and is projected to persist till October and possibly beyond. The good news is that some of the affected offshore refineries are slowly kicking back into gear by restarting production, and the domestic supply of gas is expected to receive a significant boost once these refineries get back online fully.
The rising price of gas and coal has made people across the world switch their utilities to fuel. The threat of even bigger consequences of China’s economic downturn emerging, and the effect it has already had on investors, still looms large. So too does the possibility of more stringent monetary policies coming from the U.S. Federal Reserve in the coming weeks.
The domestic supply of crude reached its lowest level since 2017, declining to 218 million barrels. The price of gasoline is expected to increase considerably if the rising oil prices persist. The stockpile of crude oil in the US has also been affected as it reached significantly low levels just last week, exceeding even the projections of analysts. However the reduction of gasoline stock remained within the projections of analysts. Global oil demand has been on a decline this year, though the situation is expected to improve once vaccines are administered to more people.