Why you should fear oil prices at $90, $100, $150, or $200: Morning Brief

[mahatmakanejeeves]

Yahoo Finance

Why you should fear oil prices at $90, $100, $150, or $200: Morning Brief

Brian Sozzi · Anchor, Editor-at-Large
Mon, March 28, 2022, 5:58 AM

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Monday, March 28, 2022

Almost any direction you look, it points to higher oil prices and a potentially damaging effect on the global economy — one the market will have to factor in once and for all. ... To be sure, the stage is set for a renewed push higher in oil prices after a momentary relief sell-off. ... President Biden's "cannot remain in power" comments with respect to Russian President Vladimir Putin at this weekend's NATO meeting will likely be seen as bullish oil prices. ... Then there is the delayed domino effect of harsh sanctions by the West on Russia beginning to infiltrate through the oil markets.

"Major energy companies and commodity-trading houses balked at buying crude oil from Russia in the days following the invasion of Ukraine. Banks also stopped financing these trades, shippers refused to load cargoes and insurers stopped covering them, fearful of running afoul of sanctions or upsetting company stakeholders," The Wall Street Journal writes. ... That climate has the Financial Times (and pros on Yahoo Finance Live) warning of $200 oil prices.

As one would expect, oil prices at such elevated levels will hurt corporate profits — perhaps big-time. Let's use tech giant Amazon — which operates large oil-sucking distribution centers and an army of gas-powered trucks (until Rivian delivers the company thousands of EVs in 2040) — as a benchmark as to what could be coming once earnings season starts soon. ... The higher cost for diesel caused Morgan Stanley analyst Brian Nowak to mark up his 2022 fuel expense estimate for Amazon by a whopping $6 billion. That is billion with a b.

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[SWBTATTReg]

1. But the opposite effect is happening too, more oil drilling is happening in TX (and

probably elsewhere), conservation measures are underway by literally millions of people, businesses, and plus, we have a whole new generation of electric cars, and other modes of transportation. Of course, the %s aren't as good as we like, but still. After a little pain (or a lot of pain for some), the markets will react as they usually do (supply and demand) and prices/supplies will adjust accordingly.

[JT45242]

2. Get the Iran deal done and lower Venezuela sanctions... frackers etc.

Iran could almost single handedly replace all Russian crude oil on the market. Venezuela would ease the burden in NA and Sa. If the Iran deal hadn't been trashed to give Putin more leverage by the defeated former guy, Russia's influence and fear of them turning the oil/gas screws on the EU would be virtually non-existent.

There is also the matter that the shale oil and fracking companies have refused to increase their output. We are not suggesting that they go full on stupid by producing so much oil that they drive the price below profitability which they did following the great recession. If they were to double their production, oil would sustain a price in the $60-80 barrel range, which would still be profitable for them and keep the economies rolling while absolutely crippling Putin and Russia.

Putin played the puppet pResident to get out of the Iran deal so that the oil supply to the EU and Asia would be vulnerable to his machinations. Take that power away.

[DBoon]

3. We may not like the Venezuelan regime

but they have yet to invade one of their neighbors