High oil prices threaten the global economy with renewed inflation, says the Polish Economic Institute in the latest edition of the Economic Weekly. It recalls the estimates that at the end of the year there may be a shortage of 2.7 million barrels of raw material per day on the market.
As PIE points out, according to the International Energy Agency (IEA), the oil deficit in the fourth quarter of 2023 was to be approximately 1 million barrels per day, but in the face of Saudi Arabia’s decision to extend the production cut by 1 million barrels per day and Russia limiting exports by 0.3 million barrels per day by the end of the year may result in an oil deficit of 2.7 million barrels per day in the fourth quarter of 2023. Some analytical centers suggest an increase in oil prices to USD 100. per barrel this year, which may postpone the recovery from the slowdown in consumer spending, the Institute points out.
As PIE reminds, Brent crude oil price, which is an international benchmark, exceeded $90. per barrel in the second week of September 2023, and since June 2023, the average Brent price has increased by 25%. The decisions of Saudi Arabia and Russia, members of the OPEC+ cartel, to extend crude supply restrictions contributed to the largest price fluctuations since November 2022, when oil prices were just stabilizing after sharp increases during the initial energy crisis last year. – says the Institute.
What will affect oil prices in the near future?
According to PIE analysts, three main factors may reduce the price of oil in the coming months. The first is the search for alternative supplies in countries outside OPEC, or an increase in production in Iran and Iraq. The second mechanism supporting the reduction in oil prices would be the release of reserves from the Strategic Petroleum Reserves USA. On the demand side, it may have the greatest impact on reducing oil prices China’s economy, where macroeconomic data indicate a potential crisis. Regardless of the implementation of a given scenario, the greatest threat to the West’s raw material security may be the developing cooperation between Saudi Arabia and Russia, which in the current economic conditions are willing to work hand in hand, increasing global oil prices – PIE concludes.
Main photo source: PAP/EPA/ANTONIO BAT