Finance

This Is How The Future of Crude Oil Price Will Be

The sharp rise in the crude oil price for the past 2 months is significant enough to influence the price level faced by people in the U.S.. For instance, the Consumer Price Index (CPI) YoY increased from 5.3% (August) to 5.4% in September, indicating that the inflation is not cooling off yet.

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Nonetheless, there are multiple reasons that can explain the soaring oil price is just a coincidence.

1. Temporarily high demand in fuel oil

China’s Shanxi Province, which is the primary coal mining region, was severely hit by flooding. Therefore, dozens of coal mines were forced to shut down, which even deepened the energy crisis. Since the coal price is skyrocketing crazily because of less production, several users for power generation switch their needs to crude oil. However, this will only be considered as short-term, seasonal factors will not exist continuously.

2. No more weekly unemployment benefits

Unfortunately, some laborers lost their jobs during Covid-19, but the government agreed to distribute $300 unemployment subsidies every week. Guess what, because of these well-paid benefits, some people have become discouraged workers and stopped looking for jobs . As a result, as companies are required to pay more to attain workers, the mining cost of crude oil increases, leading to the higher oil price. Nevertheless, the benefits already expired in September, so it’s hopeful that more workers will try to go outside and find jobs.

3. EIA oil inventory are increasing

The U.S. Energy Information Administration (EIA) announces that the crude oil inventory keeps rising for at least 3 weeks. In addition, EIA also anticipates that there will be more inventories hoarding in 2022. Hence, the crude oil price will drop gradually.

In a nutshell, the multi-year highs of oil prices are just temporary, and we can expect that the price will go down in 2022. As long as you’re interested, we’ll keep following up this topic for you!

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