Oil prices have risen to a 14-year high, while gasoline prices have surpassed $4 per gallon, approaching a national record, as the United States and its allies discuss potential restrictions on the purchase of oil from Russia following the country’s invasion of Ukraine.
So far, Russian oil has been exempt from Western sanctions, at least directly, in an effort to limit economic fallout in the United States and Europe.
However, the prospect of this changing briefly drove the price of Brent crude oil, the global benchmark, above $130 per barrel, its highest level since 2008. In late morning trade, Brent was trading around $124 per barrel.
“We are now talking to our European partners and allies to look in a coordinated way at the prospect of banning the import of Russian oil,” Secretary of State Antony Blinken told CNN on Sunday. “That’s a very active discussion as we speak.”
However, price rises have accelerated since Russia’s invasion of Ukraine late last month.
According to AAA, gasoline prices have risen 45 cents per gallon in the last week, to a national average of $4.06. That’s within a penny of the all-time high set in 2008. (Adjusted for inflation, the 2008 record would be worth $5.37 today.)
Diesel fuel prices increased even faster, reaching a national average of $4.61 per gallon.
“I saw diesel for $4.79 last week, and it was definitely a sticker shock,” said Monte Wiederhold, an independent trucker based in Lebanon, Ohio. He typically purchases 170 to 200 gallons at a time and has stated that he will have to increase the $750 limit on his fuel card.
Wiederhold’s trucking rate includes a fuel charge that is updated weekly. However, with gas prices surging by more than 60 cents a gallon in the last week, it’s difficult to keep up.
“We’re getting squeezed,” he explained. “If you adjust it and it then takes a big jump, you run that week to the point where you don’t recover.”
Oil prices could gain even more
How much higher energy prices may rise depends on the shape of any sanctions and the availability of additional supplies to replace any lost Russian exports.
The United States could simply refuse to buy Russian oil, but if other countries continue to buy it, there would be little effect on global supplies and little upward pressure on prices.
However, if the United States and its allies act in concert to restrict Russian exports, global prices may rise. Russia currently supplies approximately 7% of the world’s oil and other oil products, exporting approximately 7 million barrels per day.
Finding other sources of oil
The Biden administration is eager to find Russian oil substitutes. The administration has urged Saudi Arabia and other OPEC members to increase output.
US officials are also said to be in talks with Venezuela about loosening restrictions on the country’s oil exports. If ongoing talks aimed at reviving the Iran nuclear deal are successful, global oil supplies may benefit.
Rising oil prices may also increase domestic oil production. Federal forecasters predict that oil companies in the United States will produce 12 million barrels per day this year, up from 11.2 million barrels per day in 2021.
Because Ukraine and Russia are both major suppliers of corn and wheat, the war in Ukraine has also contributed to an increase in grain prices. This could result in further price increases at the supermarket. Rising grain prices are a particular source of concern in the developing world, where people rely heavily on imported food.
