Crude Oil Prices May Soar
London: 31 October 2023 (TraderMade): The World Bank has issued a grave warning, stating that oil prices could reach unprecedented levels, exceeding $150 per barrel. This caution comes in the context of the ongoing conflict between Israel and Hamas.
The World Bank's baseline forecast anticipates oil prices averaging $90 per barrel in the current quarter, with a subsequent decline to an average of $81 per barrel next year as global economic growth slows. However, the Bank also outlines three alternative scenarios for oil prices:
Small Disruption
A global oil supply reduction of 500,000 to 2 million barrels per day, similar to the reduction during the 2011 Libyan civil war. This would push oil prices to a range of $93 to $102 per barrel.
Medium Disruption
Comparable to the 2003 Iraq war, with a global oil supply reduction of 3 million to 5 million barrels per day. Initial oil price increases of 21% to 35% would occur, reaching between $109 and $121 per barrel.
Large Disruption
Similar to the 1973 Yom Kippur war, where the global oil supply would shrink by 6 million to 8 million barrels per day, leading to a 56% to 75% increase in prices to between $140 and $157 per barrel.
The oil embargo of 1973, which resulted in a fourfold increase in crude oil prices, had profound economic consequences, including higher inflation and rising unemployment.
Experts emphasized the potential dual energy shock to the global economy resulting from the ongoing Ukraine conflict and a further escalation in the Middle East conflict. This situation could impact energy costs and lead to higher food prices, potentially causing widespread food insecurity.
