Oil benchmark Brent hit $110 a barrel in trading last week. What will it do this week?
A report issued by the Japanese Nomura Bank warns that if oil exports from Libya and Algeria were to come to a halt because of political turmoil, oil could double in price to $220 a barrel within months. In the absence of oil from these two countries, OPEC’s spare capacity will decline to 2.1 million barrels/day (b/d), the level that had driven the price of oil to $147 in 2008. [It was reported elsewhere that oil exports from Libya have already declined by 25% or about 400,000 b/d]
The higher price the consumer pays for gasoline is tantamount to taxation which reduces the purchasing power and could stall the revival of the global economy which was hit hard by the financial crisis of 2008-2009.
Source: Al-Sharq Al-Awsat, London, February 24, 2011
Courtesy of MEMRI.