Energy
Saudi Arabia Sees $75 Oil, Which Would Kill An Economic Recovery
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Saudi Arabia’s oil minister expects oil to move back to $75, about 22% higher than it is now. He also believes that OPEC will not have to cut production for crude prices to rise. Demand is already strong in Asia, Saudi Arabian oil minister Ali al- Naimi is quoted by Reuters as saying. He believes that the increasing need for oil in other large industrial nations will rise as the global economy recovers.
The Saudi formula may work, but only if the move up in crude prices trails GDP improvements.
If crude moves to $75 due to speculation or an increasing need for oil in China and India, it could ruin a recovery in the US, EU, UK, and Japan. Consumer and business demand would be severely undermined if a greater percentage of every dollar of income has to go to oil and gas. The recovery of industries like automotive and airlines could be pushed back several quarters or, possibly, several years.
Low oil prices have played a part in keeping the recession from getting worse. It appears that is about to change.
Douglas A. McIntyre
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