Could we see $200 Oil?
Could we see $200 a barrell oil in the near future? Stop laughing. As crazy as $200 oil sounds don't rule it out. The craziness in the Middle East could cause major problems with world oil and in return cause major problems here in the United States.
Crude futures rose to their highest in more than two years in New York today as Libya’s violent uprising threatened to disrupt shipments from Africa’s third largest supplier. The commodity surged to $96.39 a barrel in New York, and to $108.42 in London. Libyan leader Muammar Qaddafi vowed to fight a growing rebellion until his “last drop of blood.”
Do not put it past Qaddafi to pull an Iraq and sabotage his own oil fields by setting them on fire.
“If Libya and Algeria were to halt oil production together, prices could peak above $220 a barrel and OPEC spare capacity will be reduced to 2.1 million barrels a day, similar to levels seen during the Gulf war and when prices hit $147 in 2008,” the Tokyo-based bank said in a note today.
“The closest comparison is the 1990-1991 Gulf War,” during which OPEC’s spare capacity dropped to 1.8 million barrels a day and prices surged 130 percent in seven months, Nomura analysts led by Michael Lo in Hong Kong wrote.
Nomura said the $220 prediction may be an underestimate, as speculative investors trading oil who were not active in the early 1990s may amplify the price gain in the event of an export halt The result would be catastrophic for an already weak US economy. Gas prices would surge to $5 a gallon plus. Airlines would have to raise prices significantly just to survive.
Think about shipping and trucking. Our store goods would rise significantly in price. Hope it does not happen, but the turmoil in the major oil countries in the Middle East poses a major risk. We have already seen oil prices surge from the mid $80s to the high $90s in just he last week.
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