U.S. Oil Tops $112 a Barrel, Highest Since 2011

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That’s the last time a barrel of U.S. crude oil was as expensive as it got on Wednesday, showing how worried people are that the escalating Russia-Ukraine war is disrupting the global supply of oil, especially at a time when inventories are shrinking.

A barrel of West Texas Intermediate crude, a North American benchmark, rose as much as 8.8% to reach $112.51 on Wednesday, the highest level since May 2011. Last week, when the war was just beginning, prices were in the low $90s. The Russian military stepped up its attacks on Ukraine, and the international community added sanctions against Russia that could keep that country’s vast supply of oil from reaching the world market. 

Making matters worse was a decision by OPEC (the Organization of the Petroleum Exporting Countries) not to ramp up production to help supply more oil to the world, as well as a decline in weekly U.S. oil inventories. The Energy Information Administration said on Wednesday that U.S. crude oil inventories dropped in the latest week and were about 12% below the five-year average for this time of year.

Oil prices are seen as an indicator of where inflation is headed, and that looks markedly higher. Consumers have likely noticed higher prices at the pump already—the average national price for a gallon of regular unleaded has jumped about 12 cents to $3.65 in the last week because of the surge in oil prices. That will lead to higher prices for a lot of things because of the additional fuel and transportation costs to move and deliver goods to where they need to be. 

On Tuesday, the U.S. and the 30 other member countries of the International Energy Agency attempted to relieve the pressure with a 60-million-barrel release of oil from strategic reserves, and indicated more releases could come later. However, economists said that likely wouldn’t be enough to provide any lasting relief.

“Drawing down strategic reserves is a short-term solution, and clearly, longer-term solutions are needed,“ wrote Warren Patterson, head of commodities strategy at ING, in a commentary.

Have a question, comment, or story to share? You can reach Medora at medoralee@thebalance.com.

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