National Bank: Oil prices could rise by up to 99 percent

The Austrian National Bank (OeNB) looked at how the price develops with different countermeasures. According to the OeNB broadcast on Thursday, the authors Martin Schneider and Richard Sellner arrive at price increases of 38 to 99 percent (without countermeasures) and 18 to 47 percent (with several countermeasures) in their model calculation.

About a fifth of the world’s daily oil consumption passes through the Strait of Hormuz. Due to the blockade by Iran, the supply of oil is greatly reduced and prices rise sharply. In the first two weeks, the price for a barrel of Brent rose from $73 to around $100, according to OeNB economists.

Previous price increases in the lower range of the calculations

A total closure of the strait would reduce global oil supply by 20 million barrels per day. If the blockage continues, according to OeNB calculations based on price reactions observed in the past, this will lead to a price increase of 38 to 99 percent to $101 to $146. According to the authors, the price increases observed so far are in the lower range of the calculations. This could be because many market participants “assume a temporary blockage and expect a gradual normalization of oil supply.”

In addition to the total closure, the authors also calculated three other scenarios. These included various countermeasures to mitigate the supply shock – the diversion of 5.7 million barrels per day via pipelines, exemptions for Iranian tankers and the release of strategic petroleum reserves. In a scenario with all countermeasures, the price of oil would be in the range of $86 to $107, according to the authors. That would mean an increase of 18 to 47 percent compared to the value before the Iran war ($73). For their calculations, the economists Schneider and Sellner used a simple supply and demand system for the global oil market.