We’ve really been feeling the sting with gas prices at the pump the past few weeks and it looks like the problem is only going to get worse. Oil traders are now speculating oil barrels could jump to $200 this month, which spells bad news for everyone.
What We Learned
- Oil traders predict prices could reach more than $200 per barrel.
- Traders and contractors report a consistent increase in prices.
- Other areas may see rising prices due to sanctions with Russia.
- Neil Cavuto spoke to an economics professor who believes oil and food prices will continue to rise.
Oil traders spoke to Fox News and believe the ongoing Russian-Ukraine war could have dire repercussions for the oil industry. According to them, the international fallout could drive prices up this month, with optimistic traders thinking it will be more than $200 per barrel.
Today, prices to buy call options increased, including at least 200 trade contracts to buy May contracts for Brent futures at $200 a barrel by the end of the month. June Brent contracts also increased at a $150-a-barrel call option and doubled just before the weekend. Additionally, a $180-a-barrel option jumped up 110 percent. In short, analysts across the board believe oil prices are only going to rise and barrels could get progressively higher.
For reference, The U.S., Saudi Arabia, and Russia are the world’s largest oil producers. Russia alone exports 7.8 million barrels a day of crude oil on average. Making matters worse is the fact opportunistic traders are looking to make extra money on the potential oil scarcity. With many countries enacting financial sanctions, on top of traders taking advantage of things, we could see skyrocketing prices in other sectors as well.
Economics Professor Gives his Thoughts, Stating Oil Prices Could Spark Even Higher Inflation and Interest Rates
University of Louisville economics professor Alexei Izyumov also spoke to Neil Cavuto about oil prices this morning. Izyumov shares the same sentiments as oil traders. According to him, the real “oil shock” is still coming.
Cavuto mentioned rising prices and inflation, asking Izyumov if he thinks the trend will continue. Not only does Izyumov believe it will, but the worst also has yet to come.
“I see more similarities to the 70s,” he stated. “So the price hikes that we are observing now at 6, 7 percent inflation rate, and those other increases in jet fuel and food that we see might be much less important going forward. What I see is a possibility of a real oil shock similar to what happened in the 70s, which of course brought inflation way up to 10 percent and more. And then led to interest rates increasing, which we haven’t talked about yet.”
Further, Russian embargos on things like gas may also spike inflation rates, which will adversely affect interest rates too. Naturally, that is something we would like to avoid.