Why are oil prices rising?

Oil prices have risen above $90 per barrel in recent days, reaching their highest level in the last 10 months. Fuel prices have also increased due to rising oil prices.

With the latest increase, the price of a liter of gasoline increased to 38.52 TL. The price of diesel in many cities exceeded 40 lira. Rising oil and fuel prices have revived fears about inflation around the world.

REASONS FOR THE INCREASE IN OIL PRICES

So why are oil prices rising recently?

Decisions by Saudi Arabia and Russia to restrict production caused oil supplies to decline and stocks to fall. Riyadh and Moscow announced last week that they would extend production and export cuts for the rest of 2023.

The International Energy Agency (IEA) and OPEC recently published new forecasts that continuing cuts would create a deficit in oil markets this year. “The alliance between Saudi Arabia and Russia has caused an uphill battle in oil markets,” the IEA said in a statement this week.

On the other hand, better-than-expected economic conditions in major energy-consuming countries, such as the United States, caused new records to be set in global oil demand in 2023. The world is expected to consume a record 101 .8 million barrels of oil per day this year.

“The stability of oil demand and supply management by Saudi Arabia and OPEC have caused a big fluctuation in market sentiment since June,” said Raad Alkadiri, an analyst at Washington-based Eurasia Group.

HOW MUCH CAN PRICES GO UP?

Brent crude oil rose to $93.70 a barrel on Thursday. West Texas crude oil was trading at $90.16. Both indicators hit 2023 highs. Brent oil has risen more than 25 percent since June.

Many analysts predict that oil could surpass $100 in the coming weeks due to strong demand, tight supply and the US administration’s lack of tools to cap prices.

Enverus Intelligence Research analyst Al Salazar said: “Global oil demand is at record levels and OPEC continues to cut production. Crude oil and product inventories are relatively low. “Simple math means Brent oil costs $100,” he said.

WHAT DOES THIS MEAN FOR THE ECONOMY?

The rise in oil also causes a new acceleration of inflation. It is considered a great danger that inflation will go off track again at a time when the US Federal Reserve’s (Fed) efforts to control prices are beginning to bear fruit.

According to data released this week in the US, annual inflation in August was 3.7 percent. Last month, this figure was 3.2 percent. The main reason for the 3.7 percent increase in consumer prices was the high price of oil.

Gasoline prices in the United States rose to $3.86 per gallon on Thursday. The price of diesel, which is essential for transportation, agriculture and other industries, has also increased almost 20 percent in the last three months, reaching $4.53 per gallon.