Paul Sankey, president of Sankey Research, stated that structural factors will keep crude oil prices above $100 per barrel for the year ahead. In an appearance on “Bloomberg Surveillance,” Sankey linked these high crude prices to increased costs for refined products, specifically noting the impact on diesel prices. He predicted that the current pricing environment would result in an “expensive winter for the average European,” highlighting the direct transmission of crude costs to regional energy supplies and consumer budgets.
The current price of oil is driven by the fundamental balance of supply and demand, with significant volatility often triggered by geopolitical risks, such as war or recession fears. While no single event is cited as the sole cause of the current price level, the market reflects a premium for risk amid ongoing uncertainties. Historically, oil prices have experienced sharp rises tied to conflicts and supply cuts, as seen during the 1970s Middle East embargo and the 2008 financial crisis, before crashing during the 2020 pandemic lockdowns when demand plummeted and prices fell below $20 per barrel.
Brent crude serves as the go-to metric for tracking global oil performance because it prices a large share of the world’s traded crude. It is distinct from West Texas Intermediate (WTI), which is the primary benchmark for North America. The U.S. Energy Information Administration relies on Brent as its primary reference in its Annual Energy Outlook, underscoring its role in international market analysis. The current high price point also influences other energy sectors; for instance, significant changes in oil prices can affect natural gas markets, as some industries may swap fuels based on relative cost, thereby altering demand dynamics.
For consumers, the relationship between crude oil and retail gasoline prices is not linear. Crude oil typically accounts for more than half the cost of a gallon of gas, but the final pump price includes refining, wholesale, tax, and retail markup. A common market pattern, often described as “rockets and feathers,” means that while gas prices may rise quickly when crude spikes, they often fall much more slowly when crude prices decline. In the United States, the Strategic Petroleum Reserve acts as a backup supply to protect energy security during crises, providing quick relief for consumers and essential industries during supply shocks, though it is not designed to solve long-term price issues.
The U.S. government’s approach to energy policy also factors into future supply expectations. For example, the 2025 administration moved to reopen more than 1.5 million acres in the Coastal Plain of the Arctic National Wildlife Refuge for oil and gas leasing, reversing previous restrictions. This policy shift aims to increase domestic production, potentially mitigating price spikes by expanding available supply. However, as long as global demand remains robust and geopolitical risks persist, analysts like Sankey expect the high-price environment to endure, continuing to pressure inflation and logistics costs globally.
