FRANKFURT, Germany (AP) \u2014 Oil prices have risen, meaning\u00a0drivers are paying more for gasoline\u00a0and truckers and farmers more for diesel.<\/p>\n\n\n\n
The increase also\u00a0complicates the global fight against inflation\u00a0and feeds Russia\u2019s war chest. That poses problems for politicians as well as the people having to spend more to get to work, transport the world\u2019s goods or harvest fields.<\/p>\n\n\n\n
Here are things to know about the recent increase \u2014 and where prices might be going:<\/p>\n\n\n\n
Above all,\u00a0Saudi Arabia\u2019s decision to cut back\u00a0how much oil it sends to global markets has pushed prices higher.<\/p>\n\n\n\n
The world\u2019s second-largest oil supplier has slashed production by 1 million barrels a day since July and decided this month to\u00a0extend the cut\u00a0through the end of the year.<\/p>\n\n\n\n
Russia, Saudi Arabia\u2019s ally in the\u00a0OPEC+ oil producers\u2019 coalition, also extended its own cut of 300,000 barrels a month through 2023.<\/p>\n\n\n\n
Simply, tighter supply means higher prices.<\/p>\n\n\n\n
International benchmark Brent oil traded at just under $94 per barrel Monday, up from $90 before the extension on Sept. 5 and from $74 before the Saudi cut was first announced. U.S. oil traded at around $90.50, up from $68 before the Saudi cut.<\/p>\n\n\n\n
HOW HIGH COULD OIL PRICES GO?<\/p>\n\n\n\n
Some analysts think oil could hit $100 a barrel based on robust demand and limited supply. But that\u2019s far from the only view.<\/p>\n\n\n\n
Oil prices can be volatile, and while they might briefly top $100 in the coming months, they\u2019re unlikely to stay there, said Jorge Leon, senior vice president for oil markets at Rystad Energy. He foresees prices in the low $90s on average in the last three months of the year.<\/p>\n\n\n\n
That\u2019s still high historically, he said, supported by \u201cresilient\u201d\u00a0demand for fuel to drive and fly.<\/p>\n\n\n\n
The Saudi cuts were a\u00a0unilateral move\u00a0outside the framework of the OPEC+ alliance, meaning the kingdom can make changes as needed to quickly respond to shifting market conditions.<\/p>\n\n\n\n
Leon said the Saudis will review the cuts each month \u2014 and could add barrels back if prices spike to levels that could seriously\u00a0worsen inflation\u00a0in countries buying oil. Excessive price increases could mean central banks worldwide\u00a0hike interest rates further\u00a0or keep them higher for longer.<\/p>\n\n\n\n
\u201cI don\u2019t think it will be clever for the Saudis to push that hard,\u201d Leon said. \u201cThe last thing you want to do is fuel inflation again with much higher oil prices. That\u2019s going to kill economic growth, and lower growth is going to mean lower oil demand at the end of the day.\u201d<\/p>\n\n\n\n
WHAT OTHER FACTORS AFFECT PRICES?<\/p>\n\n\n\n
A big question is demand for fuel, which is picking up along with\u00a0rebounding travel\u00a0following the depths of the COVID-19 pandemic. A robust U.S. economy increases demand for oil \u2014 and the price \u2014 while\u00a0weak growth in China\u00a0and Europe has the opposite effect.<\/p>\n\n\n\n
\u201cWe see the upside potential for the oil price as being virtually used up and if anything envisage setback potential in view of the weak economy,\u201d said Thu Lan Nguyen, Commerzbank head of commodities research who foresees oil at $85 per barrel by year\u2019s end. \u201cThe oil price is only likely to climb more lastingly once the economic outlook begins to brighten, which should be the case next year.\u201d<\/p>\n\n\n\n
Another factor is financial speculation, and it appears investors are piling into the oil market with bets that prices will rise.<\/p>\n\n\n\n
\u201cMuch of the price surge beyond $85 per barrel is due to a flood of speculative money, while fundamentally there is still plenty of oil in the world to meet demand for now,\u201d said Gary Peach, oil markets analyst at Energy Intelligence.<\/p>\n\n\n\n
Plus, more Iranian oil may come on the market as the U.S. \u201cturns a blind eye\u201d on enforcing sanctions to keep prices from rising further, Leon said. That could add 200,000 to 300,000 barrels a day.<\/p>\n\n\n\n
Costlier oil feeds through to\u00a0higher prices for gasoline and diesel, especially in the U.S., where roughly half the pump price reflects the cost of crude \u2014 the rest is marketing, taxes and other costs.<\/p>\n\n\n\n
Crude is a smaller share of gasoline and diesel prices in Europe because fuel taxes are much higher there.<\/p>\n\n\n\n
Average U.S. pump prices are still well below the\u00a0record $5 per gallon\u00a0seen in summer 2022. But at $3.85 per gallon, they\u2019re still up 15 cents from a year ago. Oil costs are keeping gas prices high even as driving demand drops with the end of summer vacations and plentiful gasoline stocks, according to auto club AAA.<\/p>\n\n\n\n
Diesel prices have risen\u00a0as well, along with higher oil costs and refineries facing shortages of the specific kinds of crude best for making diesel. Refineries also are choosing to produce jet fuel instead, chasing profits as air travel rebounds. A gallon of diesel cost $4.58 last week, up from $4.34 a month ago.<\/p>\n\n\n\n
That hurts farmers, who use a lot of diesel, and adds to the price of consumer goods transported by truck, which is pretty much everything.<\/p>\n\n\n\n
Diesel supplies got even tighter Friday after Russia said it would\u00a0halt the export of refined oil products\u00a0to hold down fuel prices at home.<\/p>\n\n\n\n
Oil is Russia\u2019s main moneymaker, so higher prices help the Kremlin pay for its invasion of Ukraine and weather sweeping Western sanctions aimed at crushing its\u00a0wartime economy.<\/p>\n\n\n\n
The recent rise in oil prices, along with a cutback in the discount that\u00a0sanctions forced Russia to offer\u00a0Asian customers, means Moscow will earn \u201csignificantly more revenue from those exports,\u201d said Benjamin Hilgenstock, senior economist at the Kyiv School of Economics.<\/p>\n\n\n\n
The additional revenue could reach an estimated $17 billion this year and $33 billion next year, he said in an online talk hosted by the Brussels-based European Policy Center.<\/p>\n\n\n\n
Russia has lost some $100 billion in oil revenue following a\u00a0European Union import ban\u00a0and a\u00a0$60-per-barrel price cap\u00a0imposed by the Group of Seven major economies, which bars Western insurers and shippers from handling oil priced above that level.<\/p>\n\n\n\n
Russia, however, has increasingly found ways around the cap, including using a fleet of ghost tankers masking their ownership and origin of the crude they carry.<\/p>\n\n\n\n
Any additional export earnings help\u00a0support Russia\u2019s currency\u00a0and what it can import \u2014 including weapons components.<\/p>\n\n\n\n
U.S. President Joe Biden has faced criticism from Republican lawmakers to encourage more oil drilling and scrap his\u00a0support for electric vehicles.<\/p>\n\n\n\n
But that criticism largely overlooks the rise in U.S. oil production over the past year. The U.S. Energy Information Administration reported that oil production averaged 12.8 million barrels a day in June, up 1 million barrels from 12 months ago, close to the levels achieved before the pandemic began in 2020.<\/p>\n\n\n\n
Biden has said he considers oil production essential to keep the economy going as a bridge to a future with EVs and renewable energy.<\/p>\n\n\n\n
Still, the White House views the oil market worldwide as being undersupplied, in line with recent OPEC data that indicates there will likely be a worldwide shortfall of 3 million barrels a day. The administration is also in touch with domestic and international producers on longtime supply needs, trying to ensure that the risk of higher oil prices does not disrupt economic growth.<\/p>\n","protected":false},"excerpt":{"rendered":"
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