Oil Prices Could Cause a Recession
Our economy is the source of our military strength, and right now we need both to be as strong as ever.
From CNBC. The U.S. ban on Russian oil could exacerbate already-spiking oil and food prices, analysts warned, and that could set off a recession if escalated further.
If Russia retaliates by refusing to supply Europe with oil, that could “easily” send oil prices up another $20 to $30 per barrel, said Andy Lipow, president of Lipow Oil Associates. Moscow previously threatened to cut Europe off from its gas supplies if Western countries targeted its energy sector.
After President Joe Biden announced a ban on Russian fossil imports Tuesday, U.S. crude traded above $128 per barrel, while Brent jumped above $130 before paring gains. The U.K. and European Union also said they would phase out Russian fossil fuels. Prices had already been soaring in recent weeks, surging to highs not seen since 2008.
“My greatest fear is that these prices have risen so fast that you cause a recession in Europe and Latin America, that rolls on into the United States, that ultimately affects China’s ability to sell consumer goods to the rest of the world,” he told CNBC’s “Squawk Box Asia” on Wednesday.
Russia supplies 11% of global oil consumption, 17% of global gas consumption and as much as 40% of Western European gas consumption as of 2021, according to statistics from Goldman Sachs.
In a worst case scenario, a complete ban on Russian energy imports in all major consuming countries would “severely reduce and disrupt energy supply,” sending prices further into “uncharted territory,” wrote Caroline Bain, chief commodities economist at Capital Economics.
“Inflation in advanced economies would end the year at around 5% as opposed to the 2.4% we forecast prior to the invasion, and the effects of the drop in households’ spending power and power rationing in Europe would push the euro-zone into recession,” Bain wrote in a Monday note….
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