As demand for energy continues to skyrocket due to the post-COVID recovery, U.S. oil prices have hit $80-a-barrel for the first time in nearly seven years.
On Monday, crude oil closed at $80.52 a barrel. The last time oil finished above $80 was October 31, 2014. While seasonal fluctuations in gas prices are typical, with hikes expected during the summer when leisure travel and transportation are at a high, they usually temper by the fall.
The national average price for gasoline has increased by 7 cents in the last week alone, landing at a steep $3.27 a gallon on Monday, according to AAA.
The price spike seems to contradict the administration’s claims that recent inflationary pressures are transitory.
As energy demand persists, supply has lagged significantly behind, prompting President Biden to demand that OPEC and its allies increase oil production. As one of his first acts in office, Biden curtailed domestic drilling by shutting down the Keystone oil pipeline and imposing a moratorium on new oil and gas drilling leases.
The cartel of 13 oil-producing nations mainly in the Middle East and Africa has the power to expand output and help anchor the price surges but has so far only committed to adding slightly more oil to the market.
The administration’s commitment to cut greenhouse gas emissions in half by 2023, in accordance with the Paris Climate Accords, could exacerbate supply issues.
The seven year record high for U.S. oil prices also comes amid a looming energy crisis, marked by surges in natural gas prices and coal costs in addition to oil.
In Europe, natural gas is now worth the equivalent of $230 per barrel, a 130 percent increase from early September and eight times higher than the same period last year, according to data published by the Independent Commodity Intelligence Services.
The story is similar in East Asia, where the cost of natural gas is up 85 percent from the beginning of September, settling at approximately $204 per barrel in oil terms.