The series of analysts who believe oil could reach $100 this year seems to grow weekly. Whatever the pace, the chance of $100 oil is back on the table for the first times in years. Brent crude last breached that figure in early 2008. It stayed there well into the summer.
In 2008, the reasons for high oil prices where geopolitical which could be a major catalyst now. Violence in Nigeria, one of the world’s largest producers what the main culprit then. In 2018, the primary triggers would be Iran sanctions and a disintegrating political and economic situation in Venezuela, the nation with the world’s largest proven reserves.
The sanctions against Iran are likely. Venezuela had new elections, in which Venezuelan President Nicolas Maduro was reelected. But, hunger and inflation have been hallmarks of his time in office. One reason for the problems is that oil production has plunged.
Counterbalancing forcec which could move crude downward are Canadian and U.S. shale prosecution, and a possible increases in supply from OPEC and Russia. Like week, rumors of OPEC production changes moved crude prices down. They are, however, $78, up from less than $64 three months ago, a 22% increase.
Crude prices were $76 in September 2007. It took less than four months for them to explode to $100. Some of this was blamed on speculation. Supply cuts by major producers, particularly Nigeria, however, played a substantial role. The volatility of prices recently has certainly caused the return of speculators. Their role may change little from what it was almost a decade ago.
Brent crude at $100 would have a chain effect. Among the damage it would do it to U.S. consumers. Gas prices would rise toward $4 as they did in 2008. Gas is at just shy of $3 today based on the average of gallon of regular across the country. High gas prices have already hurt airlines. Although some hedge the prices, the chance that carriers could loss money at $100 crude is very high. Companies which rely on petrochemicals would also face higher prices.
Oil at $100 would be a catastrophe for an already slowing economy. It is one of the few things which could quickly knock GDP off its axis.
While forecasts for $100 oil are in a minority, the group is slowly growing.