Yesterday saw prices rise to the highest points in nearly 14 years, mirroring the lead-up to the 2008 financial crisis. Yet by the end of the day, crude oil had shed $3/bbl, and fuel prices ended nearly flat. Don’t count that as a win for consumers, though – today prices are back to their upward trajectory, with crude up $6/bbl and fuel prices posting 15+ cent gains.
Amid all the challenges in Ukraine – the latest of which was a nuclear facility that caught fire last night – traders are speculating that prices are going to keep rising. JP Morgan is forecast that oil prices will average $110 in Q2 2022, a number that would have been seen as preposterous just a few months ago. They also forecast that continued disruption of Russian oil could cause oil prices to end the year at a staggering $185/bbl. That’s as high as the very peak of 2008, if you inflation-adjust the 2008 high of $145.
The nuclear power plant fire was particularly concerning for traders for several reasons. First, a severe meltdown would quickly escalate the situation, possibly giving Western countries enough reason to expand sanctions to oil and gas. Second, as Europe’s largest power plant, the Zaporizhzhia facility is a major source of electricity for Ukraine. Without it, the country would ultimately need to rely on even more gas and oil for heating and power, increasing fossil fuel demand. This morning, reports indicate that the fire has been contained, radiation is at normal levels, and the plant is operating with its former personnel under Russian control. Ukranian President Zelensky addressed the attack, noting the need for additional protection from NATO countries since a nuclear plant meltdown would be “the end for everyone…the end of Europe.”