War in Ukraine is beginning to have some trickle-down effects on surrounding countries. After sanctions and bans were placed on Russia, the rest of the world began to see a massive boom in oil prices, and the stock market in Russia saw a massive collapse.
The price of oil reached $105.18 a barrel early last week, that’s almost a 10% increase.
And now, Brent Crude oil has reached a high of $139.13 per barrel during the early minutes of trading Monday morning. This is the highest it’s reached since July of 2008.
Just when Americans were finally starting to see a drop in gas prices, they seemingly shot up overnight.
Russia is one of the largest energy producers, and not that their supply has been cut off, this price bump is only going to get worse unless the rest of the world acts fast enough to combat it.
With persistently high inflation still rattling households across the country, it doesn’t seem to be looking very good.
Global oil prices have spiked more than 60% since January 2022. The U.S. benchmark for crude oil jumped to almost $140 per barrel.
UBS commodity analyst Giovanni Staunovo said that should there be a prolonged war on the horizon, Brent oil could move above $150 per barrel.
“We consider $125 per barrel, our near-term forecast for Brent crude oil, as a soft cap for prices, although prices could rise even higher should disruptions worsen or continue for a longer period.” He said.
If most of Russia’s oil exports are cut off, prices for oil could soar as high as $200. Russia is one of the world’s top exporters of crude and oil products, making up about 7% of the global supply.
Mitsubishi UFJ Financial Group Inc. (MUFG) and JP Morgan analysts say oil could rise to $180-$185 this year and could cause a global recession.
After the crisis in Ukraine began, the International Energy Agency met and decided to release 60 million barrels of oil from their strategic reserves, in an attempt to combat these surging prices.
Oil isn’t the only commodity being severely affected by Russia’s invasion of Ukraine. Agricultural prices for wheat and corn – both of which are key exports from Ukraine – rose more than 5%, and are up more than 20% so far this year.
Global markets are crumbling, and worries about economic growth are surfacing in the face of severe inflation. After the US and several other countries placed sanctions on Russian banks and financial systems, the value of the Russian ruble plunged to a record low – worth less than 1 US cent.
Additionally, several large companies have announced plans to scale back or pull out of business dealings and ventures in Russia, such as Shell and BP.
Shell intends to exit equity partnerships held with Gazprom entities. https://t.co/UVidOeydZB
— Shell (@Shell) February 28, 2022
Although it’s somewhat unclear how this will affect oil prices further in the US, lawmakers and congressmen have been urging Biden to release oil from the strategic reserve because “Hardworking families cannot continue to bear the economic hardship of high gas prices while paying for more expensive groceries and medicine,” said U.S. Sen. Mark Kelly (D-Ariz.).
