London: World Bank’s latest report forecasts that global oil prices could up to $ 140 to $ 157 barrel in case of “Large disruption” scenario in Middle East, resembling impact of 1973 Arab oil embargo.

Report read that global oil prices will average around $ 90 barrel in fourth quarter of this year and decrease to an average of $ 81 in 2023 due to slowing economic growth, which reduces demand for oil.

However, report also highlights significant risk that an escalation of ongoing Middle East conflict could cause substantial spike in oil prices.

Report points out that since start of Israel-Hamas war, oil prices have increased by only about 6 percent, whereas prices for agricultural commodities, most metals and other commodities have seen minimal changes.

“Medium disruption,” roughly equivalent to Iraq war in 2003, could lead to reduction of global oil supplies by 3 million to 5 million barrels per day, resulting in prices between $ 109 and $ 121 per barrel.

“Large disruption” scenario, resembling impact of 1973 Arab oil embargo, would reduce global oil supply by 6 million to 8 million barrels per day, initially causing prices to jump to $ 140 to $ 157 a barrel, an increase of up to 75 percent.

Report also highlights potential consequences of sustained high oil prices, including higher food prices, particularly in developing countries. World Bank emphasises potential impact of an escalation of Israel-Hamas conflict on global oil prices and advises policymakers in developing countries to prepare for possibility of increased inflation.

Published in The Daily National Courier, October, 31 2023

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