When oil prices fall, they generally track many costs to industry and agriculture, including chemicals and fertilizers. And shipping becomes more economical. But when they rise sharply, as they did in 2008 and 1970, they tend to raise other prices and suppress the overall economy. This often has political repercussions.
Predicting energy prices has always been a fool’s game because there are many factors, including the expectations of traders buying and selling fuel, the political fortunes of unstable producing countries like Venezuela, Nigeria and Libya, and investment decisions for government and private oil. Company executives.
Today, these complexities are particularly difficult to assess.
“(When) will the oil bulls start revising expectations downward?” It was the title of a recent commodity report for Citigroup. With a global recession “looming,” she said, “what’s more likely, a strong hurricane season, where you see prices skyrocketing? The return of Iranian barrels? Or a recession, with oil hitting the 1960s by the end of the year/early year?” 2023?” If a barrel of oil drops to $60 a barrel, average US gasoline prices are likely to drop at least another dollar a gallon.
But a few days after the Citi forecast, Goldman Sachs Commodities Research predicted a price rebound as fuel demand rebounded. The report concluded, “We see increased risks to commodity prices rooted in a scenario of sustainable growth, low unemployment, and stabilizing household purchasing power.”
The war in Ukraine remains a major variable in the global supply outlook because Russia typically supplies one in 10 barrels of the global market of 100 million barrels per day. Since the invasion of Ukraine, daily Russian exports have fallen by about 580,000 barrels. European sanctions on Russian oil are expected to tighten somewhat by February, reducing daily Russian exports by an additional 600,000 barrels.
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