Oil Price Soars US$ 116/Barrel, Highest Since 2008

crude oil

The price of US crude oil continues to soar. Noted, this price increase touched the highest number since the 2008 financial crisis. The dominant factor behind the increase in oil prices was concerns over the supply of oil as a result of the ongoing conflict between Russia and Ukraine.

Observed on Friday (4/3/2022) morning, the highest level of world oil prices broke US$ 116.57 or equivalent to Rp. 1.66 million (exchange rate of 14,300) per barrel on Thursday morning local time.

Luckily the spike happened in short time. By the afternoon, the price of US Crude oil changed to US$ 110.75 or Rp 1.58 million per barrel.

Although the highest spike after 14 years has decreased, the figure is still 20% higher than the initial position when Russia invaded Ukraine.

The price of Brent crude oil, which is the world’s benchmark, also experienced the highest spike on Thursday morning yesterday. Intraday Brent even broke at the US $ 119.84 or Rp 1.7 million per barrel, this figure was the highest since May 2012.

The cause of this high increase was the war between Russia and Ukraine. It is known, Russia is the number two oil producer in the world. As a result, Russia’s invasion of Ukraine has sparked concerns about the disruption of world oil supplies.

Western countries have not imposed sanctions on Russia’s oil and gas trade. However, some importers have begun to reduce their purchases from the country led by President Vladimir Putin.

Furthermore, the economic risks resulting from the current Russia-Ukraine war will not only be faced by the two countries, but also by almost all countries in the world. The amount of risk will be determined by the size of each country’s trade relations with the two warring countries.

Until now, the movement of oil prices has been recorded to have a very high sensitivity to geopolitical issues. This is because of the role of oil, which is still the main energy source for almost all countries in the world.

Geopolitical problems in the form of tension in an area, let alone triggering a war, will directly increase oil prices in the international market. To a certain degree, war will disrupt oil production and distribution channels. The war will also have the consequence of increasing the oil demand directly for these activities which will push oil prices to higher levels.

The Russo-Ukrainian war that pushed oil prices to a higher level has the potential to have a direct impact on Indonesia. Due to Indonesia’s status as a net oil importer and still implementing a subsidy policy for oil and gas, the upward trend in oil prices will have a direct impact on Indonesia’s fiscal and monetary conditions.