Oil prices dropped on Monday during early trading hours after last week’s surge to $139 a barrel. Russia’s invasion of Ukraine and the ensuing American sanctions have played a central role in the rollercoaster prices.
As reported by The New York Times, Brent oil was trading at $107 a barrel, down approximately 5%. American benchmark West Texas Intermediate (WTI) was also down by 6% to $103 a barrel.
Last week, oil reached a 14-year record price of $139 per barrel, as the U.S. ceased Russian oil and gas imports amid a bulk of economic sanctions drawn by the West. In December as the Russia-Ukraine war was brewing, Brent cost $65 a barrel.
President Joe Biden “had initially resisted calls for such aggressive sanctions on Russian oil, concerned that they would push fuel prices higher —a potentially polarizing issue in an election year.”
However, Biden changed course and levied a sanction package that has ultimately —as he himself warned— increased gas prices at American pumps.
“I said I would level with the American people from the beginning. And when I first spoke to this, I said defending freedom is going to cost,” he said a week before.
Russia had warned that, should the West reinforce the ban of Russian oil imports, oil prices could hit $300 a barrel.
Do you know which under-the-radar stocks the top hedge funds and institutional investors are investing in right now? Click here to find out.
"It is absolutely clear that a rejection of Russian oil would lead to catastrophic consequences for the global market," Russian Deputy Prime Minister Alexander Novak said in a statement on state television, quoted by CNN.
"The increase in prices would be unpredictable. It would be $300 a barrel, if not more."
Further, Novak estimated Europe would take over a year to replace current volume of oil from Russia and would have to pay significantly higher prices.
Before oil and gas sanctions, Russian oil accounted for less than 10% of all of the U.S. energy resources. According to AAA, the average price of a gallon of gas in the U.S. hit $4,325 on Monday from $4.009 the previous week —which up until then was the highest since 2008.