Crude oil prices are trading at their highest since early November, which could translate to higher gas prices for consumers and a potential rebound in inflation.
- The price of Brent crude—the international benchmark for crude oil—edged closer to $95 per barrel on Monday, hitting a new 10-month high.
- Rising crude prices could directly impact consumers through higher prices at the gas pump.
- A combination of OPEC+ supply cuts, China’s recovery from pandemic lockdowns last year, and a still-solid U.S. economy have fueled an almost 40% rise in crude prices since late June.
The price of Brent crude—the international benchmark for crude oil—edged closer to $95 per barrel on Monday, hitting a new 10-month high. The price of West Texas Intermediate (WTI) crude—the U.S. benchmark—traded marginally lower at $92 per barrel.
Rising crude prices could directly impact consumers through higher prices at the gas pump, which could further pressure cash-strapped households. The nationwide average cost of a gallon of unleaded gas was $3.88 on Monday, 20 cents higher than at the same time last year.
Because energy prices are a key driver of inflation, a sustained increase in gas prices could lead to a higher Consumer Price Index (CPI) print and a rebound in the rate of inflation. On the other hand, core inflation, which excludes food and energy prices due to their volatility, would not be affected.
A combination of supply cuts from the Organization of the Petroleum Exporting Countries (OPEC) and its allies, China’s recovery from pandemic lockdowns last year, and a still-solid U.S. economy powered by robust consumer spending have fueled an almost 40% surge in crude prices since late June, when the current rally began.
OPEC and its allies have cut production by up to 2.5 million barrels per day so far this year. Saudi Arabia and Russia have cut 1 million and 300,000 barrels per day, respectively. Saudi Arabia earlier this month extended its latest cut through December.
Crude oil prices surged to record highs last year, amid the Russian invasion of Ukraine and global recovery from pandemic lockdowns. Prices fell earlier this year, before rallying late in the summer.