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The price of oil surpassed $90 a barrel on Wednesday — its highest mark in eight years as limited supply coupled with the prospect of a Russian invasion of Ukraine sent energy prices soaring.
Brent crude futures, the international benchmark, rose by more than 2% to $90.07 while US benchmark West Texas Intermediate crude futures also jumped by more than 2% and was trading at $87.43 per barrel.
The world is watching closely as the geopolitical crisis in Eastern Europe has escalated, with the US promising to provide oil and natural gas to Europe if Moscow cuts off supplies in retaliation for sanctions.
The Biden administration has vowed to impose harsh sanctions against Russia if its forces invade Ukraine.
Fears of Russian military action have deepened as Moscow has steadily increased its military buildup along the border with Ukraine.
Some estimate that there are 100,000 troops or more along the border.
Russian forces were recently seen moving military equipment into Belarus — stoking fears of an invasion from the north.
Analysts at Goldman Sachs predicated last week that oil would exceed $100 a barrel in the third quarter of this year — perhaps climbing as high as $105 per barrel by the first quarter of next year.
Goldman cited a “surprisingly large deficit” in the oil market as demand returns to pre-pandemic levels despite the recent surge in cases fueled by the Omicron variant.
In a note to clients, Goldman on Wednesday said it did not expect disruptions to supply if war broke out in Ukraine.
“Commodity markets are increasingly vulnerable to disruptions, after a couple years of historically low outages following the initial COVID shock,” the investment bank wrote in a note obtained by CNBC.
“Against the backdrop of the tightest inventory levels in decades, low spare capacity and a much less elastic shale sector, this points to the skew of large energy price moves shifting to the upside, reinforcing the case for a rising allocating to commodities in portfolios.”
The surging energy prices are costing Americans more at the pump.
Nationwide, Americans are paying $3.34 per gallon on average for regular unleaded – a sharp increase from $2.40 per gallon from a year ago.
The trend is expected to get worse throughout this year. GasBuddy previously warned that prices at the pump could hit $4 per gallon by Memorial Day.
Rising prices are a key concern for the Biden administration ahead of the 2022 midterms. Inflation hit 7% in December, the highest level in four decades.