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The panelists agreed that estimates are more likely to undershoot than overshoot the realized oil price. Under a plausible bad-case scenario-disruptions in Algeria’s oil supply, for example-the price could even reach $140 or $150 per barrel over an extended period, enough to cut a percent or more from world growth. Khan cited research by the International Monetary Fund, which determined that a sustained price of $120 per barrel-not far from the Brent marker’s recent $115 per barrel-would inflict some damage on the world economy. If another disruption affects supply, prices could spike very quickly, with potentially dangerous implications, the panelists warned. Feedback mechanisms that keep the price from surging too high and a healthy oil supply may also have helped. Even as events unfolded in the Middle East, the price held steady, suggesting that forward-looking oil markets had already taken the unrest into account. Though the oil price has risen, Timmer noted that price volatility was low in March. Saudi Arabia is deploying a powerful mix of force, religious ideology, and public spending to quell unrest. According to Boucek, however, revolution is not likely there.
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Since then, little has changed in the oil market’s supply and demand, but, Webster explained, market fears have caused Brent to surge to $115 per barrel. The Brent Crude oil marker, which is used to price the majority of crude oil, was at $90 per barrel in December. Today’s Oil PriceĮven before turmoil broke out in the Middle East, the global recovery-and rising demand from emerging markets in particular-had placed upward pressure on oil prices.
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If prices rise further and stay elevated for a period of time, the global recovery could be in danger.Ĭarnegie’s Christopher Boucek, Mohsin Khan of the Peterson Institute, the World Bank’s Hans Timmer, and PFC Energy’s Jamie Webster discussed the complex set of political and economic issues shaping today’s oil markets. Even though recent unrest in the Middle East has been limited to countries that have little effect on the global supply of oil, uncertainty in the oil markets has surged and prices have increased significantly.