“Fill up the car, now.” The warning of an analyst who speaks of a world crisis like in the `70s
A true global energy shock, similar to that of the 1970s, is shaping up, warns analyst Wayne Cole in a Reuters material entitled “Fill up the car, now” and published before the opening of European stock markets.
Brent crude crossed $100 a barrel on Monday morning and never looked back, reaching a high of $119.50. (at the time of publication the quote was around $109/barrel, which is an increase of 17.5%).
This crude oil benchmark at one point was up 25%, a level that if still recorded at the end of the day would represent the largest daily jump in history and would mean that oil is up 60% since Donald Trump ordered the attack on Iran.
These are the kind of numbers that are usually associated with a global recession, the Reuters analyst notes. Currently, world oil consumption is lower and there are other sources of crude oil, but analysts agree that they are not enough to deal with a protracted conflict.
And it looks like this one will be a long one. Trump's call for “unconditional surrender” and Iran's selection of the former radical supreme leader's son as the new radical supreme leader appear to make a concession by either side difficult.
A look at shipping tracking website Marine Traffic shows that oil tankers don't dare cross the Strait of Hormuz, and given the way Iran launches missiles, they might not even if war insurance were available and affordable. In the absence of crude oil, some Gulf states are running out of storage space and cutting production, and restarting it is a long process.
Airlines, seriously hit by price increases
This is very quickly reflected in fuel prices. About half of Europe's jet fuel comes from the Straits, which has led to record prices, equivalent to about $190 a barrel.
Asian airline stocks took a hit on Monday, although they may not have noticed amid the general “carnage”.
The Nikkei stock index fell by about 7%, South Korea's stock market by 8% and Taiwan's by 5%. European futures corrected by 1-3% and those on Wall Street by about 2%.
Rising prices for liquefied natural gas, jet fuel, and fertilizer will make it more expensive to heat your home, take vacations, or buy food.
For American consumers, the real problem is always gasoline. Wait until prices at the pump rise 10%, 20% or more, and the ensuing outcry could be loud enough to end a war, analyst Wayne Cole said.
