News by VICE

Oil prices are rising and not because of Hurricane Harvey

by Vice Money
Sep 14 2017, 12:34am

Consider it an economics lesson on the fly. If the supply of something goes down, but the demand for something goes up, or stays the same, what do you get? The answer, of course, is higher prices.

And that seems to be what’s going on at the moment in the oil markets. Prices for U.S. crude oil are up more than 1.5 percent Thursday, topping $50 a barrel. So far this month oil prices are up roughly 6 percent, reaching their highest level in five months.

The math is simple. Fuel demand is expected to continue to increase thanks to rebounding economic growth in the U.S. and Europe, according to a report earlier this week from the International Energy Agency.

In the short-term, demand has been pinched by Hurricane Harvey, which slammed Texas a couple weeks back. Crude oil product dropped sharply, but has since bounced back, according to the U.S. Energy Information Agency.

But the more important reason for the increase is that the cartel of oil exporting nations known as O.P.E.C., a usually unruly assemblage, is acting more unified and coordinated in working with Russia to cut back on supply to keep prices firm. In other words, don’t expect gas prices to fall any time soon. At $2.65 a gallon nationwide, they’re about 22 percent higher than last year, according to AAA.