Russia’s invasion of Ukraine spiked oil prices to over $100. On March 8, 2022, it reached $127. It spiked over $100 again in June of that year.
Oil recently settled into a consumer-friendly pattern; it fell as low as $56 last December. That is over for now. JPMorgan says crude could go to $120. In a note to clients, Natasha Kaneva, head of global commodities research, said “international Brent benchmark could surge to as high as $120.” MarketWatch reported he also said if the war in the Gulf reaches the point where supplies slow toward zero, “Brent could trade in the $100-.” That could be in as little as three weeks.
Wood Mackenzie had a similar forecast: “Higher oil and gas prices are certain as the closure of the Strait of Hormuz threatens to disrupt 15% of global oil supply and 20% of global LNG supply, with oil prices potentially exceeding $100/bbl if tanker flows are not quickly restored.”
People forget that when the CPI rose 9.1% year over year in June 2022, much of the increase was due to oil. The price of “energy commodities” was up 60.6% for the same period. The crisis of $100 oil is the inflation crisis for the typical consumer, driven by gas prices and home heating oil. In 2022, gas went to $5, briefly
How long will the current conflict be? How long will the US keep troops there? If the Strait of Hormuz is closed for a long time, get ready for more inflation.
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