Arathy Somasekhar, Sabrina Valle and Liz Hampton

HOUSTON (Reuters). – Oil prices are at an all-time high. As consumers respond to rising power and pump prices, they will cut their consumption.

As gasoline, diesel, and power prices reach multi-year highs this week in global oil markets worldwide, they reached as high as $139 per barrel. These surges are due to oil buyers refusing cargoes coming from No. Russia was the 2nd largest oil exporter in Russia after it invaded Ukraine. It has contributed to existing oil shortages as well.

Houston’s CERAWeek energy conference saw executives from the oil industry say that prices are approaching levels that will reduce demand. Consumers are paying 47% less to fuel their car than they did a year ago.

There’s always money, right? Adam Bielawski filled his tank in a Toronto gas station Monday.

Gas is “kind of a necessity,” he said, noting that his commute to work will be longer and could lead to tightening the belt.

Andy Brown (chief executive, Galp Energia), said that energy price shocks can quickly lead to people making decisions to not buy the product.

He said Monday that there was a possibility of “demand destruction” due to recent fuel price rises. This was his opinion at the CERAWeek conference. Galp said that he worries about the impact of rising oil prices on his efforts to shift towards clean energy.

The rise in diesel and gasoline prices was causing more problems for consumers in Europe who have struggled with spiralling electricity bills.

Repsol (OTC) Chief Executive Josu Josu Imaz stated that Monday’s wholesale electricity price in Spain was 500 Euros ($540/MWh). This is a record peak hour and twice the December level.

According to Imaz, “We cannot sustain these high prices.” We need an energy transition and not destruction.

John Hess (NYSE :), the CEO of U.S. producer Hess called upon the United States (USA) and the International Energy Agency(IEA) (IEA), to coordinate the release of 120 million barrels oil and to commit to a similar release within the next weeks.

He declared, “This is an urgent,” and lamented that the 60 million barrels of strategic reserve oil had not been enough.

Tengku Tafik CEO, Malaysia’s state-owned oil firm Petronas said, “The prices that they have, aren’t sustainable.”

DEMAND SQUEEZE

Recent days have seen concerns about rising demand as a result skyrocketing prices. This is because of disruptions to Russian exports, which has left the world’s oil markets short of supply.

Last month, the IEA which provides advice to nations regarding energy policy and supplies, increased its projection for oil demand for the year based on continued economic growth following the outbreak of coronavirus.

The 2022 forecast was increased by almost 800,000 barrels/day. It predicts an increase of 3.2 million barrels per daily to well beyond the pre-pandemic 100 million bpd level in 2019.

Experts warned that it is impossible to meet this demand without Russian oil supplies. Mohammad Barkindo (OPEC Secretary General) stated that the global shortage of oil capacity is insufficient to make up for lost Russian oil.

Analysts JP Morgan Chase (NYSE:) & Co and Bank of America (NYSE:) have predicted oil could hit $185 to $200 per barrel if Russia’s oil exports are broadly shunned.

Although U.S. legislators have called for a ban on Russian oil, President Joe Biden has only sanctioned Russian tankers. This allows trading houses and refiners to try to avoid Russian Sovcomflot tanks.

In protest of Moscow’s invasion in Ukraine, Canada and Britain also banned oil- or vessel from entering their ports. Russia describes its actions in Ukraine as a “special operations”.

Canadian and American oil experts have asked Biden not to favor renewable energy over fossil fuels and instead renew pipeline projects.

Producors will be able to increase their output when the government approves projects “already in deliberation but have been greatly delayed”, Brigham McCown, the founder of Alliance for Innovation and Infrastructure and former chief of Alaska’s Alyeska Pipeline, said.

If energy prices rise, there will be significant inflationary pressure which could lead to demand destruction. Although I doubt that it will happen in an instant, it is likely to occur within the next few months.