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"Alert! They Are Ready To Impose Full Embargo On
Russian Oil That Will Send Price Above $185"
by Epic Economist
"Global markets are in total chaos as Europe has threatened to impose an immediate ban on Russian oil starting next week amid the worsening crisis in Ukraine. The move will likely push oil prices to explode, further impacting the price of commodities and triggering even more supply chain disruptions as shipping costs skyrocket. The consequences of this next round of sanctions can affect the entire world, and plunge the global economy into a deep recession. Even JP Morgan analysts are extremely alarmed about the potential consequences of the ban – and consumers are going to be hit the hardest by widespread price hikes.
The impact of the conflict is already having far-reaching repercussions on international trade, sparking extensive shortages of commodities and raising prices all across the board. From wheat to fuel – when resources are limited, prices can only go up. And the costs are absorbed like a chain reaction.
That’s why Europe’s plan to impose an embargo on Russian oil is triggering so much alarm. This week, the European Union has started to draft the sixth package of sanctions against Russia, and it warned that it is ready to impose a full immediate ban on Russian oil after next week’s French elections. If the bloc follows through on its threat to expand sanctions to all Russian oil, the effects on prices can be devastating, according to JPMorgan.
But according to JPMorgan’s Commodity Strategist Natasha Kaneva,"any immediate embargo measure taken by the European Commission will have a severe impact on the global oil market with risks to price entirely to the upside in the short-term,” she warned. In an interview with Bloomberg, Kaneva said that Brent Crude prices could soar by 65 percent to as much as $185 per barrel in the coming months.
Even worse, a full and immediate embargo is likely to hurt global consumers more than Russian producers in the near term, the strategist said, adding that the ban would cut over 4 million barrels per day of Russian supply from the global market.
At this point, businesses and consumers are already feeling the pinch of the rally in commodity prices of everything from crude oil to grains and metals. The year’s highly volatile commodity markets are compromising global economic growth prospects, and shoppers are already witnessing sharp increases in grocery prices.
Oil price spikes almost immediately lead to higher prices at the pump. “For every $42 rise in the price of a barrel of crude oil, the average household will spend an extra $500 annually on gasoline,” JP Morgan’s Managing Director and Head Economist for Commercial Banking Jim Glassman said.
Furthermore, given that the sea carries more than 80 percent of the world’s traded goods, and that oil price hikes have a major effect on shipping costs, inflation is going to soar all around the world this year. When freight rates double, inflation picks up by about 0.7 percentage points, and the effects are quite persistent, peaking after a year and lasting up to 18 months. This means that the increase in shipping costs observed in 2021 could increase inflation by about 1.5 percentage points in 2022.
The consequences brought on by higher energy, food, and shipping costs could weigh on the global economy and plunge the entire world into a major recession. The Global supply chain currently stands on the brink of a complete disaster, and the coming price shocks threaten to push it over the edge."
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