The findings from the model indicate that the current disruption will likely cause prices to increase sixty-six percent at their peak. Roughly speaking, Brent will rise to between $114 and $126 per barrel.
This conclusion results from my calculation that the present episode will take roughly two percent of supply from the market.
The reduction will come from falling Venezuelan production, which is also subject to US sanctions, the declining Iranian exports, and a modest cut in Libyan exports.
The latest issue of The Economist warns that “the risk of an oil price shock is increasing.” The editors are correct.
Thinking of the Einstein quote above, I end by paraphrasing the title of a great book by Carmen Reinhart and Kenneth Rogoff: “This time will not be different.”+
By Philip Verleger for Oilprice.com