Gas Prices Could Go Higher as Crude Oil Nears $100 a Barrel

Key takeaways

• Oil prices are rising again after global demand has increased while supply has decreased
• Gas prices at the pump are now approaching $4 a gallon
• An international energy consortium has decided to continue cutting production for the rest of the year

Thought the transition to clean energy was going well? Think again. Gas could get even more expensive this year as Brent oil prices have rallied throughout the summer and are now within touching distance of $100 a barrel.

A complicated dance between supply and demand is afoot, but consumers and businesses bear the brunt of price increases. As vehicles become more expensive to run, is there relief on the horizon with oil prices, or are they set to stay high for the foreseeable future? Let’s get into the details.

Why are oil prices going up?

U.S. oil prices were trading as high as $94 a barrel last week, the highest levels since August 2022, leaving billions of consumers and businesses worldwide facing rising fuel costs.

Why? Supply and demand. Any thoughts about the climate crisis being over should be out the door after the International Energy Agency (IEA) estimated worldwide oil consumption hit an all-time high of 103 million barrels a day in June.

On the supply side of things, we’re facing a global oil shortage in the short term. Cushing in Oklahoma is a major supplier of U.S. oil, but the town’s tanks only have 22 million barrels of oil — the lowest levels since 2014.

Other global suppliers aren’t helping things. The Organization of the Petroleum Exporting Companies (OPEC), a consortium of Middle Eastern and African oil producers, confirmed it would cut oil production by a million barrels a day from July to prop up previously falling oil prices. It’s had the intended effect, so OPEC has decided to extend its cut into the rest of the year.

What does that mean for consumers and markets?

The obvious issue is for the average consumer filling up their cars and trucks. Gas prices in the U.S. are now approaching $4 a gallon in a season when they usually start heading downwards. It’s the same elsewhere: Europe diesel futures are over $130 a barrel now.

Air travel stocks may also struggle. Delta Air Lines and American Airlines have slashed their third-quarter outlook, citing increased fuel costs eating into their bottom line, but kept their full-year earnings guidance the same.

On the flip side, it’s happy days for oil producers again. U.S. drillers in Texas and Oklahoma are working overtime to keep up with demand; American crude exports have reached as high as 5.6 million barrels a day, with an average of 4.1 million barrels, a 15% increase from the year before.

The bottom line

Oil prices have been on an absolute rollercoaster ride since the pandemic and the Russian conflict with Ukraine, which has left consumers literally paying the price. The short-term decision from OPEC to prop up oil prices globally is now having a marked impact not only on gas prices in the U.S. but also on the aviation industry. Buckle up for a bumpy road ahead.