Oil Prices on the Rise for the Remainder of 2022

As a follow-up to my previous article, “Oil Prices: Who Controls Them?” I am again visiting the issue of why our prices are rising. Is it the looming holidays? Is it a supply issue? What about Russia? Let’s take a look at when you will see the increase and why we cannot seem to get a break.

Why are Oil Prices High this Time?

Many factors drive the price of oil, from OPEC to the potential for a recession in the U.S. Today, October 13th, 2022, oil prices have traded about 2% higher. Brent crude futures for December delivery rose $2.05 to $94.50 a barrel, a 2.2% gain, by 12:04 pm October 13th, 2022. U.S. crude oil rose $1.95, or 2.2%, to $89.22 per barrel. Distillate stockpiles, which include diesel and heating oil, fell by 4.9 million barrels in the week ending October 7th to 106.1 million barrels, the lowest since last May, the Energy Information Administration said, versus expectations for a drop of 2 million barrels. 

There is a big difference between 2 and 4.9 million barrels, and the commodity traders know exactly how serious that is. With a lower oil supply forecast on the horizon, we will continue to see oil costs climb. This will affect diesel, gasoline, and oil for heating homes. This is especially grim news as we approach winter for those with oil-based heat. All pricing for every commodity you can think of is based on supply and demand. Our costs could be coming down now if the demand was where it needed to be and our supply wasn’t down a bit. The news of the U.S. facing a potential recession is the hard hitter here. 

Winter is Coming

The International Energy Administration is also afraid of what the winter will bring. They say that with the consistent inflation the U.S. is in that a recession is likely on the way. No one has money anymore except for the elite millionaires and billionaires. We are all struggling to afford food, fuel, and energy costs to heat our homes, and even the cost of school supplies has risen. Our wages are not enough to get us through inflation comfortably. Many of us have seen a 10-25% increase in home rental costs.

In a recession, demand tanks because the general population can no longer afford trips across the country to see relatives for the holidays or go on vacations. This means less fuel is used, fewer automobiles are driven, and even fewer automobiles are purchased. As a result, we will likely see an increase in new vehicle prices in time. 

With the threat of oil prices rising further towards the end of the year, we have to also look at an increase in the cost of petroleum-based products. This will not affect us nearly as severely as fuel, but it could mean death to some corporations.

Biden Administration & OPEC

In recent public comments and private meetings with oil executives, White House administration officials are warning that the White House could take extraordinary — and potentially economically risky steps to bring costs down if the companies do not move more aggressively to shield Americans from price spikes. With midterm elections right around the corner, those running are scrambling to find ways around the high fuel price tanking our economy even further than it is currently.

Also weighing on prices was a warning by the IEA that last week’s OPEC+ decision to cut supply by 2 million barrels per day may lead to a global recession. It’s almost as if we are all headed into recession, no matter where we live or what we do to try to stop it from happening. 

The Biden administration has taken an uncommonly active role in the gas price debate; an issue presidents have generally distanced themselves from in the past because market factors primarily guide prices which is out of the Administration’s control.

The best policy option the White House has is emergency authority to limit exports to other nations, a strategy that would be targeted at boosting inventories at home but which could destabilize global markets and further exacerbate the energy crunch. Since we are sending much oil to Europe, this could cause global problems.

On one side, we have people blaming the Biden Administration, which, if you squint, is understandable since the Keystone Pipeline build was shut down. Still, it is entirely out of the president’s hands. We don’t want to continue to destroy our earth when we have plenty of oil already, do we? We have an abundance of jobs available and, quite frankly, didn’t need the pipeline. It was simply a way for Big Oil to spread its greed a bit further. 

What’s Causing the Rise in Oil Prices This Time?

The prices continue to go up for several reasons:

Energy Secretary Jennifer Granholm issued a blistering statement in response to the end-of-September letter received from Exxon regarding oil prices. “This week’s letter from a company that made nearly $200 million in profit every single day last quarter misreads the moment we are in,” she said on Friday, September 30th. “These companies need to focus less on taking every last dollar off the table and more on passing through savings to their customers.” Ouch, but are we surprised? Unfortunately, this is out of our hands, and sadly, there is very little we can do about it because it is not a U.S. problem but a global crisis.

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