Oil prices continue to fall, hitting almost 15-month lows. One of the new factors impacting the global price of oil is the current banking turmoil further adding to the confusion of world prices. 

The fragile marketplace of the banks is one of the reasons the oil prices are fluctuating. Oil prices have now fallen 10% since regulators closed the Silicon Valley Bank. Credit Suisse, another prominent bank, is also struggling, even after receiving a $54 billion loan meant to purposely avoid collapse. And if that wasn't enough, First Republic Bank just announced that they are considering a sale. Banking is a cornerstone of business, and these struggles have scared many people, especially those with quite a lot of money stored in these locations, from holding and retrieving their money from their banks. This has caused oil futures to fall 6% in one day; the biggest drop in eight months. Now, the fear is that the current banking crisis could mirror the 2008 banking crisis, which led to a drop of almost a hundred dollars in oil prices in less than a year. Now this fear is creating a positive feedback loop, creating significantly lower oil prices than in years prior, which only exacerbates the existing fear.

However, there is another power at play here: demand. With the growing oil demand, we could see prices beginning to climb again. China and air travel are expected to increase their demand for oil in the second half of 2023. Now that China has removed its Covid-19 restrictions, its economy is finally showing signs of exponential growth. There is expected to be an increase of 3.2 million barrels a day in demand. China is still projected to become the largest crude oil consumer in the world, as Western demand for oil begins to fall as they pivot to using more renewable energies.

Air travel is also continuing to expand as Covid-19 restrictions continue to be lifted. Delta Air Lines President Glen Hauenstein said that “bookings are now outpacing those in 2019,” showing that air travel is finally hitting pre-pandemic levels. They expect that bookings will increase this year by another 10% as people may start to travel for the first time since the pandemic, with prices already rising 26% this year. Airlines are starting to see unparalleled growth in demand, which is expected to push demand higher. With Chinese demand growing, shipping prices are beginning to increase. Chinese imports are projected to pass record levels in 2020. This is pushing the price of oil tankers up. And because of sanctions on Russian oil, Western European countries are buying oil from countries farther away. This causes oil to be shipped over longer distances, which means the shipping of oil now takes longer. Which decreases the availability of oil tankers, which is pushing up the cost of shipping oil. Which in turn increases oil prices. 

However, the United States recently hit a record high in oil exports. Oil released from the Strategic Petroleum Reserve almost matched the increase in domestic output to match declining Russian exports in crude oil. At the same time, exports in America rose 22% since 2021. This was a result of European countries increasing exports by nearly 41% to supplement Russian oil as a result of the war in Ukraine. America now exports 3.4 million barrels a day. 

As record high demand continues for oil, we will see combating forces of the emerging clean energy market, electric cars, and confusion from bank collapses. The oil market will continue to be delicate as companies move forward with large purchases, and everyday consumers see the effects for their own cars. This is an issue that will not end until either the market and economy stabilize, or the companies move closer to electric, clean energy usage.

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