By Daniel DePetris
The world's supply of oil is beginning to catch up with demand. At around $90, the price of a barrel of Brent Crude has decreased by almost 30 percent from a high of $127 on March 8. The shift is translating into lower gas prices for the American consumer, a welcome relief after inflation in the U.S. clocked in at a higher-than-expected 8.3 percent. At the time of writing, the national average for a gallon of regular has dropped from $5.02 to $3.67.
Nobody, however, should be popping the champagne just yet. The global oil market is prone to fluctuation and can puncture optimistic projections in a matter of days. In fact, there's a better-than-even chance the West will again feel the pinch toward the end of this year—and ironically, the higher gas prices will have come courtesy of Washington's closest allies in Europe.
On May 31, weeks of intense negotiations culminated in a European Union import ban on seaborne Russian crude over the next six months. But a more significant item in the EU's sixth sanctions package against Moscow was a prohibition on EU insurance for vessels carrying Russian crude anywhere in the world. In other words, not only was the EU (and the U.K.) drastically cutting its own supplies of Russian crude—it was also leveraging control over the maritime insurance industry to frustrate Russia's attempts to reach markets in Asia. By taking Russian barrels off the market, the logic went, Moscow could no longer entice other oil buyers, like China and India, with deep discounts. All of a sudden, transporting the oil would be a whole lot riskier for insurers (and therefore, more expensive for the Russians).
This piece was originally published in Newsweek on September 23, 2022. Read more HERE.