Monday, July 23, 2018
A new analysis shows oil prices could rise to $200 per barrel, and even higher, in the next 12 to 18 months. Philip K. Verleger, senior adviser to the global consulting firm the Brattle Group and adviser to Congress on commodity prices, released a report from his independent firm PKVerleger LLC this week that included this bold claim.
He predicted a 2020 economic collapse based on the oil commodity market and the lack of diesel fuel. "Catastrophically high oil prices will cause the impending recession," said Verleger. "The world oil market will see prices at least double." And from there, the sky is the limit, according to his analysis.
Other analysts and oil market observers have noted that global oil reserves are thin and anticipate oil prices surging to $90-$100 per barrel after Iran sanctions kick in, while also pointing out the coming diesel crunch that Verlenger is watching.
Investment bank Morgan Stanley made a similar prediction as the world transitions from low-sulfur diesel, a cleaner-burning fuel, to lower emissions. "The stricter regulation on the fuels used by the shipping industry will result in booming demand for middle distillates that would boost crude oil demand by additional 1.5 million [barrels per day], potentially sending oil prices to as high as $90 a barrel in 2020," Morgan Stanley said this year.
Verleger says the global demand for low-sulfur diesel, which the U.S. transitioned to for trucks in 2010, will increase global demand for more expensive, less-heavy forms of crude oil to make the cleaner-burning fuel. This will place an enormous demand on the fuel, and because of the lack of refineries equipped to produce the fuel, will constrain supply and drive up prices.
And since most of the world relies on diesel fuel for commerce, it's something that directly impacts the economy, according to Verlenger.
"If nothing changes, the 2020 diesel and gasoil crisis will occur because as many as half of world refineries cannot produce fuel that meets the new regulation," the analysis read. "The owners of these units will face harsh choices," including closing down their facilities.
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