Sanctions on Russia and energy prices lead us to a deep “1980 style” recession
Rising energy prices and the exit of Russian crude from the global market risk causing a global recession, warned Francisco Blanch, head of commodities and derivatives research at Bank of America, in a recent research note. . The crisis would be like that of 1980, when GDP fell by 8% in a sad time, caused by a mix of high inflation and skyrocketing energy prices.
“Can the global economy continue to expand as oil supplies increase? Our estimates suggest that the world can handle a total outage of around 2 million barrels of Russian oil without risking a global recession, ”the statement warned.
In 2023, the BoA sees demand for oil approach pre-Covida levels, but only if Russian crude and condensate production remains at 10 million bpd and OPEC + crude oil production increases. Otherwise we will have a shortage of oil production.
" With our target of $ 120 per barrel of Brent now clear, we believe that a sharp contraction in Russian oil exports could trigger a real 1980s-style oil crisis and push Brent well beyond $ 150 per barrel " Blanch added.
Blanch pointed out that although the risks of recession are high, this is not the baseline scenario. Blanch's prediction, however, was made ahead of the EU's recently reached agreement to embargo 90% of the crude it currently receives from Russia as of the end of this year.
Some industry insiders expect the EU's partial ban on Russian imports to drive oil prices above $ 130 a barrel in the short term.
GDP is usually measured by the number of cars sold or by air travel. But, says Blanch, “no large economy can expand without energy. In our opinion, that the source of this energy is thermal or renewable does not really matter, as long as it is available ".
Blanch also said that while the US is unlikely to fall into a recession due to high energy prices, other countries may be more at risk. For example, those Europeans that do not enjoy internal energy production and are dependent on Russian oil.
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The article Russian sanctions and energy prices lead us to a deep recession "1980 style" comes from ScenariEconomici.it .
This is a machine translation of a post published on Scenari Economici at the URL https://scenarieconomici.it/sanzioni-alla-russia-e-prezzi-dellenergia-ci-guidano-a-una-profonda-recessione-stile-1980/ on Wed, 01 Jun 2022 07:00:39 +0000.