The Woodside Petroleum Limited (ASX: WPL) share price has jumped almost 9% as oil prices soar.
Woodside is one of the largest oil producers in Australia. Soon it will become even bigger by buying the petroleum business of BHP Group Ltd (ASX: BHP).
What’s driving the Woodside share price higher?
The oil price jumped to the highest price since 2008. It jumped to more than US$139 per barrel, though it did settle back down a bit lower.
What’s causing all of this volatility? There are reports that the US is pursuing the idea of a potential embargo on Russian oil. It’s discussing the idea with allies.
The US, EU and others have already applied sanctions on Russia that have caused its currency to collapse, isolated its economy and led to the seizing of oligarch assets like mega yachts.
Oil prices have soared over the last few weeks as investors weigh up what this may mean for the global supply of oil. The global economy is still very dependent on oil – most cars, planes and boats use it, it’s not as though the world has given up petrol just yet for greener energy sources.
Why is this impacting the Woodside share price?
Woodside makes its money by selling resources. A higher oil price means bigger profits for the business. The oil business should be able to grow its profit in the next result if the oil price stays at this level (or goes even higher).
The resources ASX share could also pay an even bigger dividend to investors with that enlarged profit and cashflow.
There doesn’t seem to be an end to the Ukraine conflict any time soon, so the Russian sanctions could be in place for some time, leading to stronger cash flow for Woodside for longer than expected.
Final thoughts
It’s tough for businesses that need to use a lot of oil for their business, such as Qantas Airways Limited (ASX: QAN) – it’s down 8% today. Travel businesses are also seeing selloffs, like Webjet Limited (ASX: WEB).
But the Woodside share price isn’t the only one rising. The Santos Ltd (ASX: STO) share price is also rising – it’s up 5.6% at the time of writing.
