LONDON: British households are facing further financial pressures after oil prices reached their highest level in seven years.
Fears of disruption to supplies in the Middle East have resulted in rising oil prices and this, in conjunction with inflation and a spike in energy prices, is causing the cost of living to increase in the UK. Meanwhile wages have failed to keep pace with inflation and rising costs, according to data from the Office of National Statistics.
With petrol and diesel prices already close to their highest-ever levels in the UK, the cost of driving is set to rise again after a jump in oil prices to almost $88 a barrel.
There was a $1 spike in the price after the Iran-backed Houthi militia on Monday launched a drone attack on oil facilities in Abu Dhabi, one of the region’s largest producers.
US investment bank Goldman Sachs said it expects oil stocks to fall to their lowest levels in more than two decades in the coming months, as economies ramp up their activity in an attempt to recover from the COVID-19 pandemic.
This could mean crude prices will hit $90 a barrel in the first quarter of 2022, $95 in the second quarter and $100 in the second half of the year.
“A rise in oil prices to a seven-year high and a continuing, though below inflation, rise in UK earnings has put the spotlight once again on inflationary pressures and a cost of living crisis,” Russ Mould, investment director at AJ Bell, told The Guardian newspaper.
“Traders are eyeing the $100 per barrel mark for crude oil for the first time since 2014, with the perceived diminishing threat posed by Omicron to the global economy, and supply constraints and disruption, driving the black stuff higher.”
Mould said that oil producers must decide whether to pump more crude in an effort to prevent higher energy costs from derailing the global economic recovery.
“The question now is whether OPEC will take action to address the surge in the market or risk demand destruction if it doesn’t,” he added.
