Oil prices are dropping to the lowest numbers seen since December 2021—largely driven by concerns about demand.
- Ongoing protests in China have raised some concerns that the demand for oil could drop, leading to producers preemptively lowering prices.
- The U.S. benchmark, West Texas Intermediate, dropped to $74 a barrel on Monday. The global benchmark, Brent crude, fell to $81 a barrel—the lowest price since January.
- Overall, global oil prices have decreased 35% as strict restrictions in China have kept demand relatively low.
- In the U.S., the average price of gas is now $3.55—5.7% lower than a month ago.
Why it’s news
Crude-oil prices are one of the largest determining factors on the price of gas in the U.S. If prices continue to decrease, Americans could finally see some relief at the pump.
The drop in prices comes shortly after OPEC announced that it would be cutting production by 2 million barrels per day—a move that would typically drive up the price of oil. OPEC will be meeting again in December to discuss oil production.
Prices will likely remain uncertain in the coming months as a variety of factors contribute to the rise and fall of prices. In addition to uncertainty from unrest in China and war in Ukraine, the West will soon be imposing a price cap on Russian oil.
The price cap is intended to decrease revenue to Russia in an attempt to discourage continued war with Ukraine. However, the move could cause oil prices around the globe to increase as it would likely affect the world’s supply.
Some reports have suggested that the price cap will be around $65 or $70 per barrel, but this would have minimal effect on Russian revenue.
If the price cap is implemented, there is a chance Russia could retaliate by cutting off oil supply, which would result in higher prices around the world as supply shrinks.