Petroleum Markets are Unprecedentedly Volatile
Oil prices are undergoing unprecedented levels of volatility in light of the Russia – Ukraine war. Diesel, for example, rose 70 cents over the past week, with a 35-cent increase on Wednesday – marking Wednesday as the largest single day increase in diesel history (the previous record of 29 cents was set in June 2008). Gasoline prices are also up nearly 50 cents since last week.
Why the Volatility?
This volatility spurs from the severe supply concerns from many world oil consumers – with some countries talking about potential strategic releases to ease the rising prices. Before the Ukraine invasion, Russia was contributing about 10 million barrels a day to the global oil supply. However, with banks unwilling to lend, insurers unwilling to underwrite, and shippers unwilling to move product, the Russian oil market has come to a crashing halt. Meanwhile, spare capacity globally is only about 5 million barrels a day. Even if everyone else around the globe with spare capacity contributed, you still can’t replace all the Russian crude.
Will This Impact My Ability to Get Oil?
Supply is not the concern in the United States – we have plenty of oil. In 2021, the U.S. imported an average of 209,000 barrels per day (bpd) of crude oil and 500,000 bpd of other petroleum products from Russia. This represents just three percent of U.S. crude oil imports and one percent of the total crude oil processed by U.S. refineries. By contrast, the U.S. imported 61 percent of its crude oil from Canada, 10 percent from Mexico, and 6 percent from Saudi Arabia in the same year. The impact on the oil market in the U.S. is therefore only on the price we will pay, not supply.
What about Natural Gas and Electricity?
Natural gas and electricity prices have also risen in the past few weeks, but not as significantly as oil prices. The April 2022 NYMEX natural gas contract, for example, is up 3.7%, and April 2022 electricity contracts are up around 2% in the past week, depending on location. But this pales in comparison to diesel and heating oil, which is up 28.8% in the same past week.
At Energo, our energy experts are continuing to monitor this extreme volatility, and the impacts on pricing. We continue to secure the best possible pricing for our customers, but those efforts are being quickly erased by the double digit increases we are seeing on a daily basis in the wholesale market. Rest assured, though, that we are doing everything possible to protect our customers. We hope and pray this conflict comes to an end very soon and world markets stabilize and return to normal.
Please contact our office or your Energy Advisor if you have any questions or concerns regarding this volatility. As always, we thank you for your continued business.