Oil prices have surged to a ten-month high, with U.S. crude surpassing $90 a barrel for the first time in 2023. West Texas Intermediate (WTI) crude rose by over 1.9 percent to reach $90.29 a barrel, the highest level since November of the previous year. Brent crude, the international benchmark closely related to U.S. gasoline prices, also rose nearly two percent to $93.68 a barrel.
This increase in oil prices coincides with rising gasoline prices in the United States, with a 20 percent surge in the last month alone. Gasoline prices are a significant component of the producer price index, and the recent rise in gasoline prices has contributed significantly to inflation.
Saudi Arabia and Russia’s decision to extend their cuts in oil supplies through 2023 has been a contributing factor to the increase in oil prices. Additionally, reduced oil production in the United States, with a decrease in the total oil rig count compared to the previous year, has contributed to the tightening of global oil supplies.
The Biden administration’s policies, which aim to limit domestic fossil fuel production and encourage the transition to cleaner energy sources, have also played a role in discouraging investment in fossil fuel production. While the administration has sought to engage with oil producers and refiners to stabilize supply, it has not been successful in preventing rising oil prices.
Furthermore, the decision to release a significant amount of oil from the U.S. strategic reserves in 2022, which reduced the reserves to their lowest level in four decades, has limited the government’s ability to quickly respond to supply shortages and price increases.
Despite promises to refill the strategic reserves, the Biden administration has faced criticism for not doing so when oil prices were lower earlier in the year. The recent decision to delay restocking the reserves due to high prices has added to concerns about supply stability and price volatility in the oil market.