The price of a barrel of oil, which now hovers around $111, could more than triple to a staggering $380 if Russia decides to cut its output, analysts at JP Morgan Chase are warning. With the price of a gallon of gas in America now topping $5 in many areas, such a dramatic increase in oil costs would be catastrophic to the economy.
“It is likely that the government could retaliate by cutting output as a way to inflict pain on the West,” analysts wrote. “The tightness of the global oil market is on Russia’s side.”
The West is putting the squeeze on Moscow over its war in Ukraine, but Russia, which supplies much of Europe with oil for heating and gasoline, could easily flip the script by cutting output. Cutting production by 3 million barrels a day would push global prices to $190, and a worst-case scenario of a 5-million-per-day cut would send the price of a single barrel to $380, analyst Natasha Kaneva wrote.
Western countries are dependent on Russian oil, yet want to limit how profitible production is to Russian President Vladimir Putin. The Group of Seven leading industrial nations are trying to hammer out a complex plan to cap the price Russia can fetch from oil sales to non G-7 countries as part of a menu of sanctions aimed at Russia.
“The goal here is to starve Russia — starve Putin of his main source of cash and force down the price of Russian oil to help blunt the impact of Putin’s war at the pump,” a senior Biden administration official.
Told reporters. “The dual objectives of G7 leaders have been to take direct aim at Putin’s revenues, particularly through energy, but also to minimize the spillovers and the impact on the G7 economies and the rest of the world.”
But such a cap could end up leaving Putin with more leverage than he currently has, according to the bank’s experts.
“The most obvious and likely risk with a price cap is that Russia might choose not to participate and instead retaliate by reducing exports,” the analysts wrote.
This is an excerpt from The Daily Wire.
Scroll down to leave a comment and share your thoughts.
