Global tensions drive high oil prices

Oil prices are hitting a seven-year high, following tension around the latest COVID-19 variant and Russian pressure on Ukraine.

The price of a barrel of U.S. benchmark crude oil hit $87 a barrel recently, an increase of about 36% since Dec. 1, according to the Associated Press (AP). That’s despite the U.S. releasing some oil from strategic reserves in November.

The oil price movements could put upward price pressure on virgin resin prices, improving the marketability of recycled resins. Experts from IHS Markit will explain all the trends affecting pricing for virgin and recycled resins during a March 8 plenary session at the 2022 Plastics Recycling Conference and Trade Show.

Russia provides 30% to 40% of Europe’s oil, gas and coal, and exports 4% to 5% of the world’s energy in a year, according to the AP. As tension over a potential Russian invasion of Ukraine grows and other world leaders threaten sanctions, there is concern that Russian oil supply will be cut off. 

While in the past, surges of COVID-19 have caused oil prices to fall, the same trend did not hold for the omicron variant. There is also a decreased level of oil production, AP said, after many domestic and international companies slowed production of oil at the start of the pandemic and have not yet returned to previous levels of production.

Natural gas shortages in Europe and Asia have also caused some energy providers to switch back to oil, contributing to the price surge. A Wall Street Journal article said gas-to-oil switching at power stations in Europe and Asia increased oil demand by half a million barrels a day in December and will increase demand by 300,000 barrels per day in January and February.

Crude oil prices hit an all-time high in 2008 at more than $147 a barrel, according to Trading Economics. 

In May 2020, low oil prices contributed to downward pressure on virgin plastic prices, pressuring recycled plastic producers.