Surging natural gas prices, a cold winter, and reopening of international airline travel could push oil prices to $100 per barrel and trigger the next economic crisis, Bank of America says.
Last month, the bank had already said that oil prices could hit $100 per barrel over the next six months if we have a colder-than-usual winter, which could be the most important driver of global energy markets in the coming months.
Now Bank of America says that oil potentially soaring to $100 could be the trigger to a global crisis due to high inflationary pressure.
In a note on Friday carried by Bloomberg, BofA said that gas-to-oil switching with record-high natural gas prices could spur a lot of additional oil demand, especially diesel. Then, a colder than usual winter would also push energy demand and prices higher, while a reopening of the U.S. borders for international travel would boost demand for jet fuel.
“If all these factors come together, oil prices could spike and lead to a second round of inflationary pressures around the world,” BofA analysts wrote in the note.
“Put differently, we may just be one storm away from the next macro hurricane,” the bank says, as carried by Bloomberg.
As oil prices briefly broke above $80 a barrel earlier this week, fears of persistent inflation around the world have risen as commodity prices soar. High prices of energy commodities, including of crude oil, are set to further raise inflation which is already higher than Fed and central banks’ targets. Currently, inflationary pressures are seen as mostly transitory. Yet, sustained high oil prices would put more pressure on prices.
BofA is bullish on oil not only in the near term, but in the longer term as well, due to the chronic underinvestment in new supply, driven by last year’s crisis and the net-zero commitments of energy companies and governments.
“A multiyear run up in crude oil prices is now in the cards,” Bank of America notes.
By Tsvetana Paraskova for Oilprice.com
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