The Atlanta Journal-Constitution
Oil price rise hurts U.S. drivers, aids Russia’s war
Some analysts think oil may hit $100 a barrel. Higher prices also complicate the fight against inflation, posing problems for politicians as well as people having to spend more to go to work, transport the world’s goods or harvest fields.
Oil prices have risen, meaning drivers are paying more for gasoline and truckers and farmers more for diesel.
The increase also complicates the global fight against inflation and feeds Russia’s war chest. That poses problems for politicians as well as the people having to spend more to get to work, transport the world’s goods or harvest fields.
Here are things to know about the recent increase — and where prices might be going:
Why have oil prices risen?
Above all, Saudi Arabia’s decision to cut back how much oil it sends to global markets has pushed prices higher.
The world’s second-largest oil supplier has slashed production by 1 million barrels a day since July and decided this month to extend the cut through the end of the year.
Russia, Saudi Arabia’s ally in the OPEC+ oil producers’ coalition, also extended its own cut of 300,000 barrels a month through 2023.
Simply, tighter supply means higher prices.
How high could oil prices go?
Some analysts think oil could hit $100 a barrel based on robust demand and limited supply. But that’s far from the only view.
Oil prices can be volatile, and while they might briefly top $100 in the coming months, they’re 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.
That’s still high historically, he said, supported by “resilient” demand for fuel to drive and fly.
The Saudi cuts were a unilateral move outside the framework of the OPEC+ alliance, meaning the kingdom can make changes as needed to quickly respond to shifting market conditions.
Leon said the Saudis will review the cuts each month — and could add barrels back if prices spike to levels that could seriously worsen inflation in countries buying oil.
Excessive price increases could mean central banks worldwide hike interest rates further or keep them higher for longer.
What other factors affect prices?
A big question is demand for fuel, which is picking up along with rebounding travel following the depths of the COVID-19 pandemic. A robust U.S. economy increases demand for oil — and the price — while weak growth in China and Europe has the opposite
effect.
“We 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,” said Thu Lan Nguyen, Commerzbank head of commodities research, who foresees oil at $85 per barrel by year’s end. “The oil price is only likely to climb more lastingly once the economic outlook begins to brighten, which should be the case next year.”
Another factor is financial speculation, and it appears investors are piling into the oil market with bets that prices will rise.
“Much 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,” said Gary Peach, oil markets analyst at Energy Intelligence.
Plus, more Iranian oil may come on the market as the U.S. “turns a blind eye” on enforcing sanctions to keep prices from rising further, Leon said. That could add 200,000 to 300,000 barrels a day.
How do higher oil prices help Russia?
Oil is Russia’s main moneymaker, so higher prices help the Kremlin pay for its invasion of Ukraine and weather sweeping Western sanctions aimed at crushing its wartime economy.
The recent rise in oil prices, along with a cutback in the discount that sanctions forced Russia to offer Asian customers, means Moscow will earn “significantly more revenue from those exports,” said Benjamin Hilgenstock, senior economist at the Kyiv School of Economics.
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.
Russia has lost some $100 billion in oil revenue following a European Union import ban and a $60-per-barrel price cap imposed by the Group of Seven major economies, which bars Western insurers and shippers from handling oil priced above that level.
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.
Any additional export earnings help support Russia’s currency and what it can import — including weapons components.
A Buckhead hotel was evacuated after a large fire broke out in an adjacent parking deck early Monday morning.
Atlanta fire officials said a vehicle caught on fire on the second floor of the deck next to the Homewood Suites by Hilton on Pharr Road around 4:30 a.m. It then spread to another vehicle before igniting a pile of construction debris, fire Battalion Chief Ronald Slatton told The Atlanta Journal-constitution.
The fire was extinguished quickly and contained to the parking deck, Slatton said. No injuries were reported, but two people were evaluated for difficulty breathing. About 64 guests were evacuated, not counting staff members who also left the building as a precaution.
“It definitely looked worse than what it was,” Slatton said.
One of the displaced guests was Brian Graham, who has been staying at the hotel with his 75-yearold aunt since a tree fell on his house a month ago. He said that around 4 a.m., he heard a commotion and then a boom.
“I heard people yelling, ‘Fire, fire!’ So I got up, got dressed. I looked out the window. I didn’t see anything, and I opened the door to see if I see any smoke,” he said.
There was a faint smell of smoke, and that’s when police ran down the hallways and banged on doors telling everyone to get out, he said. He rushed to help his aunt, who had just had a hip replacement.
Graham’s aunt was the only person who was taken to a hospital. Fire officials said they were concerned about her standing for a prolonged time not long after her surgery.
“Hopefully my car’s not destroyed,” Graham said as he waited to go back inside. “That’ll be the next thing I got to tackle.”
Guest Aliyah Sall said officials weren’t letting people check on their cars “because they’re still moving debris and stuff.” She had just been in the garage not long before the fire broke out, she said.
“We were sitting in the garage talking to a friend, and then I went upstairs, went to sleep and then woke up about 30 to 45 minutes later to hear all the commotion outside,” she said. “We come outside and we see the flames ... it was just a really big fire ... then we walked back in to kind of just a mess.”
While the fire did not extend to the building, Sall said the entire first and second floors had water damage and the roof was leaking. She was working to get her booking transferred to another hotel.
“It’s just kind of a real messed up situation right now,” she said.
Firefighters worked throughout the morning to put out hot spots in the garage as guests gathered on the sidewalks awaiting the green light to go back inside. By
midmorning, hotel officials said they were still figuring out where to move guests as repairs are made to damaged areas.
The cause of the fire was not clear. Officials said it remains under investigation.