New York CNN store —
Oil prices have fallen to their lowest level for the year as worries about the health of the economy overshadow worries about new restrictions being placed on Russian energy.
The sharp drop in oil prices over the past two days is mostly good news for consumers, suggesting prices at the pump should continue their recent decline.
U.S. oil fell 3.5% on Tuesday to $74.25 a barrel — the lowest since December 23, 2021. That means oil prices are down 43% since they plummeted in March amid fears of Russia invading the US Ukraine briefly exceeded $130 a barrel.
Brent crude, the global benchmark, was also down 4% on Tuesday to around $79.50 a barrel.
The oil sale comes after the West slammed Russia with fresh restrictions that, so far at least, don’t appear to be derailing global energy markets.
The European Union on Monday imposed a ban on sea transport of oil from Russia, while the West capped Russian oil at $60. Both moves are intended to hurt Russia’s ability to fund its war in Ukraine without hurting consumers by prompting Moscow to cut oil production.
“Russian oil is still on the market. As of now, Russia seems poised to play along,” said Robert Yawger, vice president of oil futures at Mizuho Securities.
Yawger said there is “no doubt” that energy markets are relieved that the price cap is not much below $60. A lower cap could have persuaded Russia to retaliate by severely cutting supply.
“You’ve got a pretty good number. We don’t want to kill the golden goose, we just want to throttle it back,” Yawger said.
The tame reaction from energy markets is welcome news for consumers who are finally getting some relief at the pump.
The national median price for regular gasoline fell two cents Tuesday to $3.38 a gallon, according to the AAA. Gas prices are down 14 cents in the past week and 42 cents in a month. The national average is almost unchanged from last year when they averaged $3.36 per gallon.
Despite the fall in energy prices, OPEC+ is sticking to its plan. The oil cartel on Sunday announced plans to stand by its oil production cuts rather than take steps to take more supply offline.
Recession fears continue to shake financial markets, including not only the oil markets but also the stock market. US stocks fell sharply on Tuesday for the second straight day of significant losses.
Stronger than expected reports on jobs, factory orders and service sector activity have fueled concerns that the Federal Reserve must act more aggressively to wipe out inflation. Some Fed officials have expressed support for raising interest rates to 5% or more next year.
“This potential 5% rate environment is really freaking people out,” Yawger said.