The World Bank in a special report it just released has warned of the danger of oil prices rising to $150 per barrel and above if the Israel-Hamas war escalates into a wider regional conflict.
That will represent a 76% rise from the current price of $81.
The report painted three scenarios in which current oil prices could jump to between $93-$121 with the worse scenario hitting as high as $157 per barrel.
“This scenario is comparable to the initial disruption associated with the Arab oil embargo in 1973, which resulted in a loss of nearly 7.5% of the global oil supply at that time,” the World Bank wrote.
World oil supply shortages of up to 2 million barrels a day could drive up the price to $93, and 5 million barrels could raise the price to $121. The worst case scenario according to the report is a disruption of over 6 million barrels per day causing a staggering upwards price to the $150’s.
“While a risk scenario involving a small decline in oil supply may lead to only a modest increase in oil prices, risk scenarios featuring more widespread disruptions could result in substantial dislocations in oil markets, with initially sharp increases in prices,” the organization wrote.
The report also indicated that high oil prices will in turn drive up other global commodities, food, transportation fertilizer, and put pressure on industrial metals such as aluminium and zinc, given their energy-intensive production.
Gold, it predicted, will rise too, although this could be because many people will opt to buy it to store value.
World Bank said countries’ economies should be prepared for this plausible reality.
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