Will pass on price hike to the final consumers

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OIL prices are heading towards the ultimate level of $100 per barrel. When it does, everybody will feel it. There is no doubt about that. In the meantime, it is the best ever legitimate excuse to blame oil-producing countries at any time, not knowing that oil producers will feel the pain of higher prices for all goods and services, as most of them import between about 50 to 95 percent of their needs from outside. Therefore, an increase in oil prices is not a happy occasion, as it leads to inflation and an increase in bank interest rates. Most likely, any increase in oil prices in the end should be a breakeven scenario for efficient oil-producing countries, the ones that are strict about expenditures and budgets, but they are few in number.

Now it seems that a level of $100 is closer than before. Some oil-producing countries have surpassed the $99 level depending on the type of crude oil that yields better and high-rated petroleum products in the global markets, or they charge a premium over the OPEC basket of $97.50 per barrel. Again, the concern is the expected criticism of OPEC+ and its decision to curb supply and production, as some will claim this as the reason.

The oil producers are not allowed to move oil prices forward but are struggling with higher cost of living, especially food and grain mainly because of the Russian occupation of Ukraine. The other factor that markets are beginning to realize is that China has woken up and increased its call for oil. This will push the prices further until it reaches its peak by the end of 2025 when electric vehicles will take over. It is also supported by coal and natural gas, which are abundantly available, instead of depending on imported oil and going for in US currency.

Also, the Russian Urals crude is now traded in the range of $100, despite the G7 boycott and restriction on it to have a selling price of $60 a barrel. It seems nobody is paying attention to such a level, and is buying instead at the market price of $100 with seemingly an open hand. The oil market will remain strong in the coming months with an increase in demand rate. It also seems other suppliers like USA producers will not be willing to invest more money into drilling and looking for new oils. It seems they are looking for better returns and dividends for the shareholders, and seeking to keep them happy and satisfied.

This is possible as long as the price stays strong and the responsibility is passed on to OPEC+, and until the petroleum organization itself starts to leak or relax its rules on the voluntary cuts. For the time being, we must wait for the $100 level, and we will later hear about the global reactions, noises, and the pointing of fingers. In the end, everybody will gain a little, but for sure not the entire $100.

By Kamel Al-Harami
Independent Oil Analyst
Email: [email protected]

This news has been read 1801 times!

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