Although oil prices have risen for 3 years and are approaching the highest point in history, international investment banks are still bullish on oil prices, and even if oil prices break through the high of $150/barrel in 2008, it cannot be compared with the impact at that time, because these ten years The Fed has released water several times. According to the inflation rate, the current oil price must rise to at least $200 to be comparable to that in 2008.
Brent is up 54% year-to-date and has nearly tripled from its March 2020 lows. Domestic oil prices, taking Beijing as an example, on March 92, 2020, the lowest gasoline price was 5.5 yuan, and the latest price is now 9.01 yuan, an increase of more than 60%.
In recent years, due to the epidemic and the conflict between Russia and Ukraine, international oil prices have only risen but not fallen. To make matters worse, the vast majority of Wall Street investment banks predict that they will rise in the future. Goldman Sachs also predicted in its June 6 report that Brent oil prices will exceed $140 per barrel, and the current price is $120. In addition, Citibank and Barclays have also raised their expectations for future oil prices.
The main concern was earlier this month that the European Union would ban insurers from insuring ships carrying Russian oil, with traders and owners saying the impact of the insurance ban would be huge because few shipping companies are willing to ship oil in uninsured tankers. A decade ago, an insurance ban blocked Iran’s oil exports, forcing Tehran to negotiate its nuclear program.
The all-time high of oil prices was set at $150 in 2008. If it breaks through the $150 at that time, is the economic environment worse than it was then? No. Because oil prices are settled in U.S. dollars, inflation has greatly eroded the purchasing power of the U.S. dollar in recent years. In 2008, inflation was only 3.84%, and now the data has risen to 8.26%. Therefore, 1 US dollar in 2008 is now 1.34 US dollars.
Looking at the inflation-adjusted oil price, the historical high in 2008 has exceeded 180 US dollars, and now the world is experiencing a round of large-scale inflation. Inflation levels in the United States, the European Union and other countries have hit new highs in decades. Therefore, the current oil price is compared with history. It doesn’t look too high.
High oil prices often lead to market volatility, triggering a recession (high oil turn to turmoil), which is likely to follow if oil prices continue to rise.
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