Oil tumbles below $100 a barrel, down 25% from peak

Lower oil prices, though, did not immediately translate to lower prices at the gas pump for people in the United States. The average price for a gallon of gas on Tuesday was registering at $4.32, down slightly from $4.33 the day before and still much higher than a year ago, when it was resting at $2.86 per gallon.

“Gasoline prices can go up like a rocket and come down like a feather,” said Tom Kloza, global head of energy analysis at the Oil Price Information Service.

COVID-19 OUTBREAK IN CHINA THREATENS TO MAKE INFLATION EVEN WORSE

There are several factors behind this week’s drop in oil prices, including investor hopes that Saudi Arabia and the United Arab Emirates may boost production.

UAE Ambassador to the U.S. Yousef Al Otaiba reportedly said that his country, one of the world’s major oil hubs, favors “production increases and will be encouraging OPEC to consider higher production levels.”

Also depressing global oil prices is the COVID-19 situation in China. Nearly 30 million people have been placed under strict lockdown orders by the government as the country faces outbreaks of the omicron variant in cities and provinces. More than 5,000 people have been infected so far in what has become China’s worst uptick in cases since the start of the pandemic.

China has maintained a zero-COVID-19 strategy, which includes the imposition of stringent mitigation measures as soon as a case is discovered rather than relying solely upon vaccinations and masking to slow the spread. Those mitigation measures include confining people to their residences and shutting down facilities like factories, where workers might come into close contact with one another.

Among the cities shut down is Shenzhen, a major tech hub that has been dubbed the Silicon Valley of China. If the virus continues to spread and millions more people are forced to stay at home, there would be a slowdown in demand from population-heavy China, the prospect of which is also partially driving down global oil prices.

Still, even despite the recent declines, oil prices are notoriously mercurial and could trend back upward as the world faces a moment of intense uncertainty about the situation in Ukraine.

“I wouldn’t rule out $200 a barrel just yet,” Bjornar Tonhaugen, head of oil markets at Rystad Energy, told CNN. “It’s too soon.”

While Russia’s march toward Kyiv, the capital of Ukraine, has been met with Ukrainian resistance, strongman Vladimir Putin’s forces are still hammering Kyiv and major cities across the country. Vitali Klitschko, Kyiv’s mayor, announced a mandatory 35-hour curfew on Tuesday morning after predawn explosions rocked the area.

“Ukraine is on fire,” United Nations Secretary-General Antonio Guterres cautioned. “The impact on civilians is reaching terrifying proportions.”

Putin is facing international resistance to his war in Ukraine, and Russia has been hit by crippling sanctions from the U.S., the European Union, and Western allies.

President Joe Biden announced recently that the U.S. would ban oil and natural gas imports from Russia, a move that hit Russia’s most important and economically rewarding industry and pushed the price of oil to the soaring heights it experienced last week.

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“We’re banning all imports of Russian oil and gas and energy,” Biden said. “That means Russian oil will no longer be accepted at U.S. ports, and the American people will deal another powerful blow to Putin’s war machine.”

The sanctions, paired with the punitive actions of many Western private sector companies, have left Russia’s economy in shambles. The ruble, Russia’s currency, was trading at less than a penny on Tuesday morning, at about 110 against the dollar.