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Falling Oil Prices Defy Predictions. But What About the Next Chapter?

When oil prices fall, many costs to industry and agriculture typically follow, such as chemicals and fertilizers. And transportation will be more economical. But when it rises as sharply as in 2008 or he did in the 1970s, other prices tend to rise and the economy as a whole tends to be depressed. And there are often political ramifications.

Energy price projections depend on so many factors, including the expectations of traders buying and selling fuel, the political fate of volatile producing countries such as Venezuela, Nigeria and Libya, and investment decisions in state and private oil. It was always a silly game. company executives.

Assessing these complexities is especially difficult today.

“(When) Will Oil Bulls Start Downgrading Forecasts?” was the title of a recent Citigroup commodities report. With a global recession “on the horizon”, “Which is more likely during a hurricane season with prices skyrocketing? Iranian barrel returns? A recession with oil prices in the $60s by then?” If a barrel of oil were to fall to $60, the average US gasoline price would probably drop by at least another $1 a gallon.

However, days after Citi’s forecast, Goldman Sachs Commodities Research predicted prices would jump as demand for fuel picks up. “Scenarios of sustained growth, low unemployment and stable household purchasing power show increased tail risks to commodity prices,” the report concludes.

The war in Ukraine remains a key variable in the global supply outlook, as Russia typically supplies 1 in 10 barrels of the global 100 million barrels per day market. Since the invasion of Ukraine, Russia’s daily exports have fallen by about 580,000 barrels. European sanctions on Russian oil are expected to tighten further by February, reducing daily Russian exports by another 600,000 barrels.

And as Russia tightens its grip on natural gas sales to Europe in retaliation for TIT-FOR sanctions, European utilities will be forced to burn more oil instead of gas.

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