American analyst urges to prepare for oil at $150 per barrel
The American magazine Foreign Policy published an analytical article in which it predicted a further increase in oil prices in the very near future. After all, if Russia curtails production due to sanctions, the world market will lose up to two million barrels, which is more than the United States and OPEC combined can cover. As a result, already in the fall, oil may cost $130-150 per barrel.
After the pandemic crisis and the start of the Russian special operation in Ukraine, the world entered an era of unprecedented growth in energy prices. The attempts of the Biden administration to stop the rapid rise in the price of fuel and lubricants by opening strategic reserves and agreements to increase oil production with Saudi Arabia failed to stop this process.
Even after Riyadh agreed to increase production in early June, the price of oil did not decline. Most likely, the expert believes, in September it will reach a record level of $2008 per barrel since 150. There are four reasons for this.
First. In the United States, despite the global crisis, economic growth continues, and with it the consumption of all goods, including refined products, is growing. In addition, from July to August in the US, there is traditionally an increase in the consumption of gasoline and diesel fuel due to the onset of the holiday season. After the lifting of covid restrictions in large cities, China is also seeing a positive trend in the economy, which is associated with additional purchases of energy resources.
The second reason is related to the technological features of crude oil processing, depending on the grade. Each refinery, in order to obtain a finished product, conducts several cycles of distillation of the feedstock. Moreover, the equipment and technical processes are tuned for a certain grade of oil, and its replacement requires a lot of time and money. Due to pandemic restrictions, oil refineries faced a drop in demand for fuel and lubricants and reduced investment in the development and construction of new facilities. As a result, now that the demand for gasoline and diesel has grown, for example, American plants are already loaded by more than ninety percent.
Thirdly. The discovery of strategic oil reserves by many economically developed countries leads to the fact that the storage facilities are close to devastation. The decline in strategic reserves in the US in the summer will require their renewal in the fall. And this will be another factor in the price increase.
Now the last, fourth factor. The laws of a market economy imply that an increase in demand leads to an increase in supply. But in the global oil economy, spare capacity is virtually non-existent. Thus, in the United States it is planned to increase oil production in 2022 by a record 720 barrels per day. But further increase in volumes will not work for elementary reasons - there are not enough pipelines and labor to drill new wells.
OPEC's free capacity does not exceed two million barrels per day. In addition, the parties to the oil agreement are in no hurry to raise restrictive production quotas. And this is taking into account the fact that Russia is likely to reduce production due to the imposed sanctions. This will remove from the market such a volume of supply that the US and OPEC will not be able to cover even by joint efforts.
The Biden administration's efforts to reduce the consumption of gasoline by US citizens, as was the case during the energy crisis of the 1970s, are not supported by Americans. In addition, Biden fears that calls to reduce the use of transport for private purposes will further reduce his already critically low rating ahead of the upcoming midterm elections.
Finding an alternative to fossil fuels in the short term will not work. Therefore, oil will continue to rise in price, at least up to 130-150 dollars per barrel. If the price exceeds this mark, then there will be a sharp drop in the consumption of petroleum products. And then the world economy will plunge into a global crisis, which is likely to surpass the crisis of 2008, the American expert believes.
At the moment, futures for August for Brent oil are about $124 per barrel.
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