Oil prices surged dramatically at the start of the week, with knock-on effects already hitting fuel prices at the pump across the United States. The sharp moves reflect ongoing disruption to global energy markets driven by the conflict in the Middle East.
Oil Price Surge
West Texas Intermediate crude in New York jumped more than 6% on Monday and another 7% by Tuesday lunchtime. At its peak, WTI touched just under $78 a barrel, representing a 19% increase in just one week. Brent crude also climbed sharply, rising 10% over two days to just under $83 a barrel.
Pump Prices Rising Fast
Fuel prices responded quickly. The national average jumped 11 cents in a single day to $3.10 per gallon. In Kansas, prices rose nearly 13 cents to just under $2.70 per gallon. Diesel prices climbed even more sharply, up 17 cents from a week ago to $3.525 per gallon in Kansas and $3.891 nationally.
Trading Platform Outage
A technical glitch at CME Group’s Globex electronic trading platform caused a full trading halt for some metals and all natural gas futures last Wednesday. It was the third significant breakdown at the platform in the past year. The outage occurred on expiry day, when futures contracts expire and many traders traditionally roll positions into the next month. Despite the disruption, natural gas prices actually settled nearly 2% higher.
Inventory Data
The government reported the largest increase in crude oil inventories in nearly six years. Commercial stockpiles rose by 16 million barrels to just under 436 million barrels. That is up nearly 6 million barrels from a year ago, though the Energy Information Administration notes stockpiles remain about 3% below the five-year seasonal average. Strategic reserves are unchanged at just over 415 million barrels, up 5% from a year ago. Gasoline inventories dipped slightly while diesel stocks rose. Demand for both ticked up slightly.
Broader US Production Picture
US crude production dipped slightly this week, largely due to a weather-related outage in Alaska, but has remained above 13.7 million barrels per day for three consecutive weeks. Texas continues to dominate domestic output, producing 5.7 million barrels per day last year and accounting for more than 41% of national production. New Mexico also grew output significantly. North Dakota saw a steeper decline in December due to a major winter cold snap, with oil output dropping 6% and the number of producing wells continuing to fall from an October peak.
On the LNG front, the US has grown its exports from 500 million cubic feet per day in 2016 to over 15 billion cubic feet per day last year, making it the world’s largest LNG exporter. The Energy Information Administration forecasts that figure will exceed 18 billion cubic feet per day by the end of next year.
Why This Matters to You
Oil and fuel prices affect nearly everything. Higher pump prices mean higher costs for commuting, deliveries and road freight. Diesel price increases in particular filter quickly into the cost of goods because so much of the supply chain relies on trucking. A 17-cent jump in diesel in a single week is significant and will be felt across grocery store shelves and retail prices in the weeks ahead.
For households already stretched by inflation, rising fuel costs add another layer of financial pressure. It is worth thinking about: How much of the current oil price surge is driven by genuine supply disruption versus speculative trading on conflict fears? If the Strait of Hormuz remains disrupted for weeks, how high could pump prices realistically go? And with US strategic reserves at 415 million barrels, at what point would the government consider releasing stocks to ease the pressure on consumers?
