Since 2014, Russian-backed rebels and Ukraine’s military services have fought a conflict in the eastern regions of Donetsk and Luhansk that has killed over 14,000 people. Recently, the Russian military launched a full-fledged invasion of neighboring Ukraine, attacking targets all around the nation. It killed several people and forced thousands to flee their homes But what does it have to do with Oil price forecast 2022, Let me explain, 

The world was already suffering from post-COVID global inflation. Concerns were rising about the increasing imbalance between the supply and demand of oil and other petroleum products. The prices of these products were already sky-rocketing after the Omnicron wave subsided. Now, the Russian invasion of Ukraine will potentially make things even worse.

Where The World Gets its Oil?

Oil is a naturally existing resource formed after millions of years of organic matter decay. It is a non-renewable resource and thus cannot be produced, only extracted from pre-existing places. Although Middle Eastern countries are rich in oil resources, Russia is the largest country globally by landmass with over 100 billion barrels of oil resources.

Along with the U.S. and Saudi Arabia, Russia is the only country producing 10 million barrels of oil per day. In 2020 alone, Russia provided 7% of the U.S. petroleum and oil products needs.

How High Can The Oil Price Go?

In recent months, oil prices have risen due to supply worries after tensions between Russia and Ukraine. Brent oil prices topped $105 per barrel for the first time since 2014, following Russia’s war on Ukraine, which raised fears about interruptions in global energy supplies. According to JPMorgan analysts, delays in Russian oil shipments might send oil prices up to $120 per barrel.

The Russian invasion of Ukraine might not only affect the international oil market supply but possibly lead to sanctions imposed by the U.S. and Europe. Russia is the second-largest exporter of crude oil in the world. Still, impending sanctions mean a high chance these exports will decrease, and the global oil prices will soar.

How High Oil Prices Will Affect The Global Economy?

Nearly one-third of energy production is through oil. Thus, any fluctuation in the prices can severely affect the world economy. In the United States, inflation, which assesses how quickly the cost of living rises, reached 7.5 percent in January. If the oil supply shortens due to the Russia-Ukraine conflict, prices may increase even more.

Higher oil costs may also have an impact on economic growth. People and businesses will have to pay more for oil and gas, reducing expenditure in other sectors and reducing GDP. According to a group of analysts, if oil prices pass the $150 threshold, global economic growth might reduce by more than 75%.

Conclusion

War always brings death and destruction to all parties involved. It also causes global inflation, which soars up the prices of commodities and services.

If the conflict between Russia and Ukraine is not solved, it might cause a booming increase in oil prices and ultimately send the global economy into a recession, That’s the Oil price forecast 2022.