Oil prices approach $95 a barrel – what this means for your wallet, according to the experts

The price of oil hit a 10-month high on Monday as the oil benchmark Brent crude approached $95 a barrel.

Major producers Saudi Arabia and Russia have been making cuts to the global supply, and a hot summer in many parts of the US drove down domestic production.   

This in turn has pushed the price of gas up to a national average of $3.88 a gallon, according to the American Automobile Association (AAA).

But it is not just the price of gasoline that is impacted by rising oil prices, experts warn. Higher oil costs can also impact the price of diesel and jet fuel, triggering a rebound to the rate of the inflation more broadly.

It comes just days ahead of the Federal Reserve’s scheduled policy meeting on Wednesday, in which it will decide on any changes to the benchmark interest rate.

The price of global benchmark Brent approached $95 a barrel on Monday – its highest level since it reached almost $98 in October

‘Gasoline and diesel prices at the wholesale and retail level react very quickly to the oil market – within 7 and 10 days,’ said Andrew Lipow, president of petroleum consultancy Lipow Oil Associates.

‘The consumer is focused on gasoline prices because you see it on nearly every street corner, but increases in [the cost of] diesel are like a hidden tax on the consumer because diesel is the fuel that’s used to deliver all the good and services that consumers buy,’ he told DailyMail.com. 

‘What we’ve actually seen is that diesel has gone up quite substantially compared to gasoline,’ he added. ‘Those higher diesel prices are translating into the higher cost of nearly everything.’

As of Monday, the price of regular gasoline was up around 1.3 percent on the week prior. By comparison, diesel was up 2.8 percent over the same period.

But while the supply of oil remains restricted, Andrew Gross, a spokesperson for the AAA, predicted that demand for gas will wane as the summer draws to a close and people do less driving. 

‘Winter blend gas is kicking in, and demand is falling into Autumn. So gasoline prices may slowly begin to decline as well, and the pace will likely accelerate as we get closer to the holidays,’ said Gross.

Winter blend fuel can contain more butane, making it cheaper to make and cheaper for the consumer. 

A rising cost of diesel can result in inflation to the price of ‘nearly everything,’ according to Andrew Lipow of Lipow Oil Associates. Pictured is a freight truck in Lecompton, Kansas

Experts predict that as summer draws to a close demand for gas will drop. Pictured is a gas pump in San Rafael, California

But in Lipow’s view, those changes will be inconsequential in the longer term. 

‘While there might be month to month change, up or down, the oil market is concerned on a longer term basis what the balance is going to be,’ he said.

‘Russia and Saudi Arabia together have stated that they will continued with their volume production cuts through the end of the year and at the same time OPEC oil demand forecasts are optimistic,’ he added.

The Federal Reserve will address short-term rates from their current record high of 5.25 – 5.5 percent in the rate announcement on September 20.

Officials are widely expected to hold interest rates steady, but another hike could be on the cards for later in the year. 

The cost of petrol drove consumer prices higher in August – with inflation accelerating for a second consecutive month to a 3.7 percent annual rate. 

Prices rose 0.6 percent month-on-month to August, driven mainly by a jump in gas prices – which accounted for over half of the increase. 

The overall energy index, which includes gas, went up by 5.6 percent in August from July.