Oil Prices Are Increasing, But Supply Is Not

Oil prices are hovering near $90 a barrel on average, its highest seen since 2014. The sudden cost increase is likely due to political tensions in Eastern Europe and the Middle East, and a supply shortage.

Normally, prices this high would call for OPEC to significantly increase oil exports. However, during a meeting this morning, OPEC and its allies decided against ramping up production, the New York Times reports.

"Saudi Arabia, still the key decision maker in OPEC, has been acting as a brake on increases, arguing for caution," the article reads. "Analysts say that markets may well heat up further in the coming weeks, especially if conflict over Ukraine threatens to disrupt energy flows."

OPEC will stick with its original plan from July to increase production next month by 400,000 barrels. While that may sound like a lot, many OPEC members have been falling short of their current output goals and will likely struggle to meet the modest jump come March, according to CNN. 

"There are concerns in the market, partly priced in, that OPEC+ will not be able to produce what they say in the future," Bjørnar Tonhaugen, the head of oil markets at Rystad Energy told CNN. "There is anxiety about damage to production capacity from Saudi Arabia to Kuwait and Russia, from too low investments during the pandemic and before."

Due to lack of supply, high oil costs are expected to stick around, per the Associated Press. "Higher oil prices are sending reverberations throughout the global economy in terms of higher consumer inflation in the U.S. and Europe and costlier fuel for heating, flying and driving," the AP report reads.