Analysts warn of a further rise in oil prices in the world

While the rise in oil prices as a result of the Russian invasion of Ukraine is already threatening economic, political and social stability around the world, with warnings of a recession, analysts predict that oil prices could rise further, more than three times compared to current prices, Radio Free Europe reports. world media writing.

JP Morgan Chase bank analysts have warned that global oil prices could reach a “stratospheric” $380 per barrel if Russia responds to American and European sanctions by reducing oil production, Bloomberg points out.

Members of the Group of Seven richest Western democracies (G7) are considering a mechanism to cap the price of Russian oil in an attempt to curb Russian President Vladimir Putin’s war machine in Ukraine, according to Bloomberg.

On the other hand, JP Morgan Chase analysts estimate that Russia, given Moscow’s strong fiscal position, can afford to reduce daily crude oil production by five million barrels without excessive damage to the economy.

For the rest of the world, however, it could be disastrous, as analysts estimate that a three-million-barrel-a-day cut would push benchmark oil prices in London to $190 a barrel, while a worst-case scenario of five million could mean ” a stratospheric” $380.

The executive director of the International Energy Agency (IAE) Fatih Birol warned that the world is on “red alert for economic recession” as energy prices rise, creating a global inflationary crisis, the Times indicates.

Birol said that the current situation is “the first global energy crisis”, worse than the oil shock of the 1970s because it includes both oil and gas and electricity.

The Organization of the Petroleum Exporting Countries (OPEC) and its allies agreed last week to increase production by 648,000 barrels per day.

While analysts predict that the price of a barrel of oil could jump from around $110 to $380, Birol said that the IAE has called on Saudi Arabia and other members to increase production, the London newspaper points out.

Although the G7 and IAE have agreed to explore the possibility of capping Russian oil prices to reduce Moscow’s revenue, critics, according to the Times, warn that it is unlikely to succeed without the support of countries such as China and India. Birol himself said that this “cannot happen only as a result of the action of the G7 countries”.

The huge rise in global fuel prices is already threatening sources of income and social stability, writes the New York Times, stating that the astonishingly fierce gallop in gas and oil prices as a result of the Russian invasion of Ukraine has been added to the troubles caused by the disruptions due to the corona virus pandemic.

In the US, average gasoline prices, which have jumped to five dollars per gallon, are burdening consumers and forcing President Joseph Biden to make difficult political decisions ahead of the upcoming congressional elections this fall.

However, as the newspaper writes, in many places in the world the jump in fuel costs is much more dramatic, and the consequences much more serious. Families worry about how to fill up their cars, heat and light their homes or cook food, while businesses grapple with rising transportation and business costs along with workers’ demands for higher wages.

The staggering rise in the price of fuel has the potential to change economic, political and social relations around the world, the New York Times estimates, indicating that high energy costs are having a domino effect. They fuel inflation, which forces central banks to raise interest rates, which then reduces economic growth and further hinders efforts to combat devastating climate change.

Rising energy prices were the main reason why the World Bank revised its economic forecast last month, estimating that global economic growth will slow more than expected to 2.9 percent this year, roughly half that in 2021.

Due to its excessive dependence on Russian oil and natural gas, Europe is particularly vulnerable to high prices and energy shortages. Now across the continent, countries are preparing emergency rationing plans that include sales restrictions, lower speed limits on roads and lower temperatures in homes to reduce fuel consumption.

However, the poorest and most vulnerable will feel the worst consequences, the New York Times points out, and points to last month’s warning by the International Energy Agency that due to higher energy prices, an additional 90 million people in Asia and Africa do not have access to electricity.

Expensive energy contributes to high food prices, lowers living standards and exposes millions to hunger. Political discontent over the price hike is felt in many places where the war in Ukraine seems distant or irrelevant, while in poorer countries the threat is greater as governments are torn between dealing with serious unrest and offering additional public aid, which requires heavy borrowing.

The U.S. is now pursuing a three-pronged strategy, which includes increasing pressure on Russia, bringing more oil to markets to lower prices, and allowing central banks to raise interest rates to levels that appear likely to trigger a recession, the Guardian noted in an editorial about the effort. of the Biden administration to lower oil prices.

The British paper says the last part of the strategy is designed to signal to oil producers that energy prices will fall. The painful recessions of the 1970s and early 1980s played a role in driving down oil prices after energy shocks and contributed to the collapse of the Soviet Union.

However, that lasted 15 years, the Guardian points out, pointing out that Putin’s Russia may not be as powerful and may be more fragile than the Soviet Union, but that there are now few signs of an imminent collapse.

By Editor

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