Michelle ThompsonUS crude oil prices surged past the $90 per barrel mark on Thursday, marking the first time in a span of 10 months. This development poses a significant threat of further elevating gasoline prices and exacerbating inflation throughout the economy.
Interestingly, even after the conclusion of the summer driving season and a decrease in demand, gasoline prices continue to rise. Gas prices are now only a few cents away from their highest point this year.
According to AAA, the national average for regular gasoline reached $3.86 per gallon on Thursday. This represents a six-cent increase compared to the previous week and a 16-cent increase compared to the same day last year.
The recent rally in the oil market has been primarily fueled by concerns over supply. Firstly, Saudi Arabia and Russia surprised the market by extending their aggressive supply reductions until the end of the year. Additionally, catastrophic flooding in Libya has raised concerns about supply disruptions in this OPEC nation. Tragically, the flooding in Libya has led to the loss of at least 5,000 lives, with thousands more feared missing.
Andy Lipow, the president of consulting firm Lipow Oil Associates, expressed concern, stating, “If the significant oil supply from Libya were disrupted for an extended period, it would exert further upward pressure on prices.” Libya, a crucial oil provider to Europe, produces approximately 1 million barrels of oil per day, as reported by OPEC. The majority of this oil is of the same light, sweet grade found in regions like Texas, New Mexico, and other parts of the United States.
Lipow explained, “Losing that supply in Europe would result in price increases there and would also attract more barrels from the United States to fill the gap.”
On Thursday morning, US crude oil reached as high as $90.26 per barrel, marking a 2% increase for the day. This represents the highest intraday price since November 8, 2022, and signifies a substantial 34% surge since mid-June.
Brent crude, which serves as the global benchmark for oil prices, increased by 2%, reaching a fresh 10-month peak of $93.68 per barrel on Thursday.
The recent surge in energy prices is undermining some of the progress that central banks had made in their efforts to combat inflation. Inflation reports released this week revealed that prices rose more than anticipated in August, largely due to the uptick in gasoline prices. Energy prices have continued to climb throughout this month.
Presently, there are twelve US states where the average price for regular gasoline stands at $4 per gallon or higher. These states include Colorado, North Dakota, and California, as reported by AAA.
