International oil cartel, OPEC, is facing shrinking capacity levels due to events on the world scale. These events focus mainly on the increasing tension due to a border dispute between Russia and Ukraine. These two Eastern European countries provide major amounts of oil supply into the world market. Thus, broader geopolitical tension can greatly impact the world's supply of oil at large, raising prices by large margins. Global demand for oil is projected rise much higher than pre-COVID levels. Low capacity and low upstream investment is also setting global oil prices to increase.
Americans will feel this far away dispute directly in the price they pay to fill up their cars. OPEC has a major influence on the world supply and price of oil. Domestic production is notable in America, but the combines power of OPEC is massive. With such major countries of production as; Saudi Arabia, The UAE, Russia, and Kuwait, OPEC's power is immense. For the average American consumer, already suffering through uncertain economic times, this adds more qualms and anxiety. Many will look towards the Federal Government and the FED to buffer these increasing blows to the economy.
Source: https://oilprice.com/Energy/Oil-Prices/OPECs-Shrinking-Capacity-Could-Send-Oil-Above-100.html
I really like how you brought this topic to the blog. Ever since the Biden administration shut down the Keystone pipeline, we have become not only energy dependent, but also have seen a major increase in our gas prices due to many other factors. I feel like continuing the construction of the pipeline would help this problem so we are energy independent. What are your takeaways about the pipeline and how we can combat our gas/energy issues?
ReplyDeleteI think one thing to remember about gas prices is the conditions that made prices lower in the first place, namely that many workers were told to stay home, lowering demand. As we ate through that supply coming out of lockdowns, I see the issue as yet another supply chain issue. Because we can't meet our same production levels, we're more susceptible to OPEC pressures, but given enough time American production should be back to normal.
ReplyDeleteIt will be interesting to see how oil prices will be effected by the tensions between Ukraine and Russia. I think that the uncertainty in oil supply is one of the main reasons the Biden administration has pushed for electric vehicles. I think it is interesting to note the fact that the Keystone pipeline was never supplying oil to the US so I'm not sure how big of an effect that actually had. I think it was more due to the fact that during the pandemic oil companies has a massive surplus of oil, and consumers had very little demand which resulted in the low prices of gas and oil.
ReplyDeleteIt would be interesting to see how the US reacts to the uncertainty in their ability to get enough oil to satisfy the demands of their citizens. Maybe this weakness in the supply of US oil forces a change in transportation usage, or the US goes to other countries, or maybe the US invests in domestic oil. Maybe there is no reaction to this issue at all only time will tell.
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