$100 Oil Price Debate Becomes Heated

Three different groups have methods for predicting the future price of oil. Technical analysts look at supply. The IEA looks at demand and supply, and a third looks at the “global risk premium.” Often, they agree. Presently, they do not.

Iran Threat –$100 Oil Tomorrow

Oil Supply –Bad News From Alaska

The argument about supply hinges on two things. The US has become the world’s largest oil producer, and its production is growing. America also has an emergency supply–the Strategic Petroleum Reserve (SPR). It was tapped when oil rose to $100 in June 2022. The Administration believes that high gas prices could hurt its chances in the next presidential election so it may be tapped again. 

Demand is based mainly on the rebound of the Chinese economy. China is the world’s largest importer, and much of that is from Iran. Iran has been close to a full-scale military war with Israel, although the chances of that appear to have tapered off.

Ukaine’s Russia Attacks

The global risk premium is mainly due to another two factors now. The first is Ukraine’s attacks on Russian oil facilities. The other is geopolitical tension between Israel and its neighbors. The second is the hardest to predict since friction could increase suddenly. 

All of these groups are likely to be partially correct on their own. And their view of the future of the global economy is similar. Oil prices above $100 for an extended period affect gas prices, heating oil prices, airlines, trucking, train, and petrochemical margins. As a whole, difficulties in these sectors would cause a recession.