2022 Oil Price Drivers: 7 Catalysts Can Push It Higher, 6 Could Create Pressure

As we start the new year, here's a look at some of the issues that could be the most important drivers of oil prices in 2022.

We have already seen forecasts for 2022 that range from moderate drops to price increases into the triple digits, so we start the year with the typical high levels of uncertainty for the future.

Here are 13 key issues to watch in the new year that might guide us regarding oil price direction as events unfold. Seven represent upward price catalysts, while an additional six imply downward pressure.

7 Things That Could Push Prices Higher

1. Russian Belligerence

Europe and the U.S. are concerned that Russia may exert further military influence over Ukraine, and this has led to talk of potential oil and gas sanctions .

Amidst this situation, it must be noted that Russia is the primary supplier of natural gas for Europe, which it has been curtailing. Less Russian natural gas in Europe leads to greater use of oil as a power generating fuel.

2. Saudi Instability

King Salman of Saudi Arabia will turn 86 in 2022. Any change in leadership in Saudi Arabia could lead to uncertainty and anxiety in the oil market. If there is a change in leadership, prices would likely rise, but the duration and intensity of the rise would depend upon the situation on the ground.

3. Chinese Expansionism

There is always a possibility that China may try to exert its influence over Taiwan or create a hegemony in the South China Sea. This could threaten oil supply lines and raise significant demand issues.

4. U.S. Environmental Regulations And Infrastructure Legislation

American environmental regulations are often seen as a burden on U.S. exploration and production. The 2022 midterm elections will take place in November and could influence the severity of regulations and their implementation.

5. U.S. Oil Production Numbers

2021 saw curb its oil imports at any time. Currently, China is by far the largest oil importer in the world, which gives the country great influence over the market.

China also has a tremendous amount of oil in inventory—both public and private—so it has the ability to curtail its imports for a time without harming its own economy. Such a decision, whether deemed necessary by Beijing or employed as an economic tactic, would hurt the price of oil significantly.

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Written By: Ellen R. Wald, Ph.D.