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What Will It Mean For The Global Economy When The Price Of Oil Soars To $200 Per Barrel?

Francesco Abbruzzino, The Uncensored Report, LLC

 

 

If you haven’t been paying attention, you will want to start watching the price of oil again.  Just before the financial crisis of 2008, the price of oil briefly shot up to 140 dollars a barrel, and experts agree that a very high price for oil would definitely unsettle financial markets now.  Unfortunately, it appears to be inevitable that the price of oil will go much higher.  Large financial institutions have become extremely hesitant to fund any projects that would “pollute the environment”, and governments around the world have made it extremely difficult for those that produce traditional forms of energy to expand operations.  Globally, there is a major push to bring in “the new green economy”, but “the new green economy” cannot provide the energy that we need.  Meanwhile, the demand for energy continues to grow all over the globe on a daily basis.  What this means is that all forms of traditional energy are going to become a lot more expensive.

 

At this moment, the price of oil is over 80 dollars per barrel, and many are anticipating that it will soon hit 100 dollars per barrel.

 

When Russian President Vladimir Putin was recently asked about the price of oil, this is how he responded

 

After the price of West Texas Intermediate (WTI) recently crossed $80 per barrel, Russian President Vladimir Putin was asked whether it could reach $100. He replied “That is quite possible.” Given Russia’s dependence on revenue from its oil exports, he was probably smiling when he said it.

 

100 dollar oil wouldn’t be much of a shock, but what about 20o dollar oil?

 

Not too long ago, a team of JPMorgan analysts suggested that we could actually see it happen

 

“We believe the evolution of coal prices might reflect supply, demand, cost of capital and energy transitioning issues for all fossil fuels, and it would certainly be possible that oil prices will follow the same pattern (inflation adjusted for oil, that would be in a $150-200/bbl range),” wrote a team of JPMorgan Chase & Co. strategists led by Marko Kolanovic.

 

Virtually all forms of economic activity require power, and so if the price of oil doubles or triples from current levels that is going to push all prices much higher than they are now.

 

Some have suggested that we could increasingly switch to other forms of traditional energy if the price of oil becomes too oppressive, but that is not likely to happen due to the widespread shortages that we are witnessing.

 

For example, supplies of natural gas have never been tighter than they are at this moment.  In South Dakota, residents are being warned that their natural gas bills could potentially double this winter

 

“The natural gas industry is experiencing shortages in supply while also seeing an increase in overall natural gas demand. As a result, homeowners should expect to see higher natural gas bills this winter,” said PUC Chairman Chris Nelson. “South Dakota’s regulated natural gas utilities, including MidAmerican Energy Co., Montana-Dakota Utilities Co., and NorthWestern Energy, are currently projecting bill increases for residential customers of at least 50% to 100% compared to the bills seen between November and February of the 2020-2021 heating season,” he explained.

 

The current natural gas shortage is the result of a number of factors. High demand due to increased exports of liquefied natural gas and increased natural gas usage for electric generation along with low production due to hurricanes have led to low storage inventories heading into the peak heating season.

 

We don’t have enough propane either.

 

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