After the constant hyping of higher gas prices by the media, you might think that falling gas prices would also be big news. After all, everyone has to buy gas and it is a price that is in their face every time they are on the highway.
Of course, the Washington Post is not ignoring the drop in gas prices. Yesterday they warned readers, “Gas prices may surge again ahead of midterm elections.”
The gist of the story is that as stronger sanctions on Russian oil go into effect in December, it could mean that more Russian oil is pulled off world markets. The piece tells us:
“An internal U.S. Treasury analysis projects that could send the price of oil soaring 50 percent above where it is today. Some market analysts are warning of potentially steeper climbs, which could push gas prices beyond $6 a gallon.”
Okay, that would be bad news if it happens, but as the piece itself points out, the sanctions to date have not removed much Russian oil from world markets. The oil that Russia is not selling to Europe and the United States is instead going to India, China, and other countries not honoring the sanctions.
It is very likely this will continue, which the Biden administration itself recognizes. That is why it is trying to push through a complex scheme for capping the price on Russian oil. If most of Russia’s current exports continue to find their way to other countries, there would be little impact on world oil prices.
While it may turn out to be the case that the sanctions are more effective in the future than they have been to date, the futures markets apparently do not expect this outcome. The current price for December oil futures is more than 10 percent below the mid-July price. Markets can be, and often are, wrong, but it would have been worth giving the perspective of some of the people who expect oil prices to fall, rather than rise.