🖤 Donations of all sizes power our public service journalism Give Now

Oil prices are plummeting as the banking crisis unfolds

Lily Jamali Mar 21, 2023
Heard on:
HTML EMBED:
COPY
Oil pumpjacks stand in the Inglewood Oil Field on in Los Angeles, California. Mario Tama/Getty Images

Oil prices are plummeting as the banking crisis unfolds

Lily Jamali Mar 21, 2023
Heard on:
Oil pumpjacks stand in the Inglewood Oil Field on in Los Angeles, California. Mario Tama/Getty Images
HTML EMBED:
COPY

The collapse of Silicon Valley Bank and Signature Bank — as well as troubles at Credit Suisse — are being blamed for much of the market turmoil we’ve seen lately. And the oil markets are no exception.

Oil is experiencing one of its biggest slumps of the last few years, with prices last week plunging as much as 10% from recent highs. The bank crisis has scrambled expectations about how much oil the global economy needs right now.

Energy expert Amy Myers Jaffe of NYU says going into this year, the thinking was there’d be plenty of demand.

But now, there are doubts “about whether the economy is going to be strong enough to support everybody’s ideas about how much higher oil demand was going to be this year than last year,” Myers Jaffe said.

Fernando Valle, a senior oil and gas analyst at Bloomberg Intelligence, calls the banking sector’s troubles a wake-up call.

“It creates a fear of contagion in the impact that it could have on consumption and ultimately investments across the Western Hemisphere,” Valle said. “And then globally at a larger scale.”

According to Valle, oil’s current slump can also be traced in part to China, where demand was expected to rebound more than it has following the phaseout of lockdowns there.

Meanwhile, Mark Finley of Rice University’s Baker Institute said analysts have been bracing for Russia to cut production in response to Western sanctions on Russian energy commodities — including oil.

“But that hasn’t been the case so far,” Finley said. “Russia has been able to find new markets for its oil.”

Finley said for consumers, a $10 per barrel decline — like the one we saw last week — could translate into a drop in gas prices on the order of about 25 cents a gallon.

There’s a lot happening in the world.  Through it all, Marketplace is here for you. 

You rely on Marketplace to break down the world’s events and tell you how it affects you in a fact-based, approachable way. We rely on your financial support to keep making that possible. 

Your donation today powers the independent journalism that you rely on. For just $5/month, you can help sustain Marketplace so we can keep reporting on the things that matter to you.