Categories: Economic News

As Oil Falls Below $90, Where Do Prices Go From Here?

When oil prices fall, many costs for industry and agriculture generally follow, including chemicals and fertilizers. And shipping is cheaper. But when they rise sharply, as they did in 2008 and the 1970s, they tend to push up other prices and suppress the broader economy. And often there are political consequences.

Predicting energy prices has always been a fool’s game because there are many factors at play, including the expectations of traders who buy and sell fuel, the political fortunes of volatile producing countries such as Venezuela, Nigeria and Libya, and the decisions of state and private oil investment. company managers.

Today these complexities are particularly difficult to assess.

“(When) will the oil bulls start to revise their forecasts down?” was the title of a recent Citigroup commodities report. With a global recession “on the horizon,” he said, “what’s more likely, a robust hurricane season, seeing prices soar? A return of Iranian barrels? Or a recession, with oil at $60 late of year/early 2023?If a barrel of oil were to drop to $60 a barrel, average US gasoline prices would likely drop at least another dollar a gallon.

But days after Citi’s projections, Goldman Sachs Commodities Research predicted a rebound in prices as demand for fuel picks up. “We see increasing risks to commodity prices inherent in the scenario of sustained growth, low unemployment and stabilized household purchasing power,” the report concludes.

The war in Ukraine remains a major variable in the global supply outlook, with Russia typically supplying one in 10 barrels of the 100 million bpd global market. Since the invasion of Ukraine, daily Russian exports have fallen by about 580,000 barrels. European sanctions on Russian oil are expected to tighten slightly in February, cutting Russian exports by an additional 600,000 barrels a day.

And as Russia further tightens sales of natural gas to Europe in retaliation for sanctions, European companies will be forced to burn more oil to replace the gas.


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