It’s absolutely unsurprising at the moment that either there’s a huge demand-supply issue or supply chain bottlenecks that are resulting in one phenomenon: Inflation.
Inflation hitting the world
Be it the US, UK, or any emerging economy, inflation is rearing its head. Prices are at an all-time high in the past 30 years and Americans have had enough of it.
When it starts hitting the wallets of the common man, things get heated up politically and inflation has no plans to return to normalcy, so the Govt had to intervene to pacify the growing angst in the society.
Strategic Petroleum Reserve kicks in
Every country has a Strategic Petroleum Reserve (SPR), which is nothing but an emergency fund of sorts for crude oil intended to be in action in times of war, or any other extreme exigency for that matter!
At this point, the US in collaboration with other oil-consuming economies (UK, China, South Korea, Japan, etc) is going to extract crude from their respective SPRs as the OPEC (Oil Producing & Exporting Countries) are not doing enough to stabilize on the production side of things.
OPEC’s stance
The alliance majorly of the middle east countries is being led by Saudi Arabia and the latter is of the opinion that there’s still a lot of uncertainty around crude prices and can fall in case any new variant of the virus comes.
Consequently, they’re not upping the production/supply as much as the oil-importing countries expect them to, which explains why the prices are in a range of $80-82 per barrel.
Oil demand is up only
If you look at the current scheme of things, irrespective of the discussions & measures around climate change, the demand for crude is up only, it’s all reflected in the prices which are hurting Govt & citizens alike!
Omicron: The new variant
As a matter of fact, the step to extract crude from SPR wasn’t an effective step to prices. For starters, the daily consumption of oil across the globe stands at 100 million barrels per day, and even after the collaborative step, the countries would only be able to extract 50-70 Million barrels which is like a drop in the ocean.
But the new variant of the Covid virus: Omicron would fulfill the desired objective of these countries. As a result, the prices went down by 14% on Friday.
WrappinThe medium-term course will depend largely upon the OPEC meeting that’s going to happen on 1st & 2nd December and how the new variant evolves.