The global price per barrel of oil is approaching $100 per barrel again, as war rages in the Middle East. While renewed hostilities between the United States and Iran have again brought traffic through the Strait of Hormuz to a near halt, Houthi rebels have begun attacking tankers in the Red Sea, driving prices even higher.
The American consumer is already strapped during these difficult inflationary economic times, and yet the war mongering by US rulers continues.
A naval blockade against Saudi Arabia in the Bab el-Mandeb Strait, at the mouth of the Persian Gulf, is also presenting an economic problem. This strait is the second-most important route for energy shipments after Hormuz. Hormuz and Bab el-Mandeb together carry the equivalent of roughly a quarter of the world’s oil supply.
Global crude benchmark Brent futures reached as high as $102 per barrel on Thursday before closing, according to a report by RT. The price officially closed at $100.69, which is the highest since May 22nd.
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What is even more terrifying is that Goldman Sachs predicted that Brent could exceed $120 a barrel in the fourth quarter and average $100 next year if disruptions in the strait continue through 2027. That cost could soar even higher if the Bab el-Mandeb Strait and Suez Canal also face prolonged disruption. JPMorgan calculates each additional month of oil supply disruption could add around $7 to $8 a barrel to Brent, pushing monthly average prices to roughly $114 if the disruption lasts three months, according to RT.
Numerous analysts, energy economists, and even US ruler Donald Trump warned that a prolonged stalemate or direct attacks on Gulf energy infrastructure could send crude into “uncharted territory.” That would be pushing the price to above $200 a barrel, triggering runaway inflation, higher interest rates, panic buying at gas stations, and a sharp slowdown in global economic growth.
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“With the possibility of a ground war seemingly increasing by the day, and tanker traffic restricted through two of the most active chokepoints in the world, crude oil is suddenly positioning itself to within striking distance of the four-year high of $126.41, with the global economy drawing down so fast it will eventually be running on fumes,” Bob Yawger, director of energy futures at Mizuho, told Reuters.
As supplies dwindle and demand remains the same, the cost of oil is going to rise following the economic law of supply and demand.