Last Friday, the US Treasury Department announced sanctions against Russia’s oil industry. An oil sanction is very similar to an embargo, or refusing to purchase a product from a certain seller for various reasons. Treasury Secretary Janet Yellen said “The United States is taking sweeping action against Russia’ key source of revenue for funding its brutal and illegal war against Ukraine.” Yellen believes this will greatly harm the Russian economy, as oil is one of their main sources of income. Russia currently has more than 180 tankers, and plenty of official and executives overseeing the energy sector.
While supply of oil is certainly going to decrease, there will likely also be an increase of demand for oil. Typically in the wintertime, individuals all over the globe consume more energy to keep their homes warm. Analysts at JP Morgan estimate that for the US, major countries in Europe, and Japan, for every decrease in one degree of fahrenheit below the 10 year average, there is an increase of 113,000 barrels per day used up in demand for heating and propane. This year, forecasters expect winter to be colder than usual in the east and warmer than typical in the west.. This could lead to concerns over blackouts or demand greater than supply in the east, and less concerns in the west.
What does increasing oil prices mean for everyday Americans?
US crude oil increased in price by $2.65, or 3.58% to end up at about $76.57 per barrel. While it is difficult to determine how much prices will increase for each consumer, it’s safe to say that oil prices will increase at least a little bit. This includes higher gasoline prices, heating and energy prices, as well as transportation costs such as airfare and ride share services. Additionally, increasing transportation costs may negatively impact businesses in the consumer packaged goods space, driving up operating costs and prices.
All of these increases in prices may lead to less discretionary spending for each household as well. Safe to say, it may be beneficial for households to focus on finding ways to save on transportation and staying warm. Households and individuals can accomplish this through simple means such as carpooling and using public transit, as well as considering alternative methods of transportation such as bikes, scooters, or even walks. Buying in bulk or locally can also be a good way for consumers to save in the long run as well.
How do you plan on saving money with expectations of increasing oil prices? Let us know in the comments.
