The price of oil continued to rise sharply on Wednesday, adding more pressure already elevated gasoline prices that are squeezing many U.S. households and businesses.
The price of Brent, the international benchmark, rose by nearly one percent to $88.27 a barrel, the highest price since 2014. West Texas Intermediate crude, which is the price of domestically produced oil, rose 1.44 percent to 86.66 a barrel.
Gasoline prices rose a penny last week, driven primarily by the cost of crude oil, according to AAA.
“In the past few weeks, we have seen the price for a barrel of oil slowly work its way from the mid-$60s to the low $80s,” said Andrew Gross, AAA spokesperson. “And the primary reason is global economic optimism, whether well-founded or not, that the worst of COVID may soon be behind us.”
The market seems to be responding to indications that omicron-variant Covid-19 infections may ebb in the weeks ahead, leading to renewed economic growth and demand for oil.
It has been just short of two months since President Joe Biden announced a release of 50 million barrels of oil from the U.S. Strategic Petroleum Reserve, nearly eight percent of the total reserve and twice as much as had ever been released earlier. Oil prices tumbled in December, although most analysts think this had more to do with the surge in new virus cases than the SPR release.
Higher oil prices are closely associated with higher inflation. Rising oil prices fuel inflation expectations of consumers and investors, putting upward pressure on wages and shifting investment toward extraction and refining from the production of other goods and services. And because petroleum is a factor of production in many goods, rising oil prices can put upward pressure on manufactured goods prices more directly.