Oil prices hit 7-year high

Date : 22 February 2022

Spot prices for Brent crude oil have reached a seven-year high with prices nearly topping US$100 a barrel as commodity markets respond to Russian intervention in Eastern Ukraine.

Oil prices hit lows of US$20 a barrel in April 2020, as a result of the initial outbreak of COVID-19. As the global economy has recovered, so have oil prices, surging to levels not seen since 2014.

Click chart to enlarge

Disputes in the Ukraine region have exacerbated this trend, with prices up over 35% since 20th December 2021.

Russia has unilaterally recognised the independence of the Luhansk and Donetsk regions of eastern Ukraine, ordering troops into the region. It is expected that these actions will begin a programme of western sanctions, targeted to hit the Russian economy.

Germany has announced that it will not provide regulatory sign-off to the Nord-stream 2 pipeline, constructed to provide gas from Russia to German households. Gas prices have surged on this news, with futures prices for contracts over the next 18 months up as well.

Sanctions in relation to the energy market, a key revenue stream for Russia, will drive global energy prices up further.

Increasing energy prices will likely drive inflation even higher for shoppers, impacting the most vulnerable households in particular. Although oil prices have previously been higher, the ability of UK households to absorb this change may be reduced on this occasion.

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