The World Bank’s latest report forecasts that global oil prices could up to $140 to $157 a barrel in case of a “large disruption” scenario in the Middle East, resembling the impact of the 1973 Arab oil embargo.
The report read that global oil prices will average around $90 a barrel in the fourth quarter of this year and decrease to an average of $81 in 2023 due to slowing economic growth, which reduces demand for oil.
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However, the report also highlights a significant risk that an escalation of the ongoing Middle East conflict could cause a substantial spike in oil prices.
The report points out that since the start of the Israel-Hamas war, oil prices have increased by only about 6%, whereas prices for agricultural commodities, most metals, and other commodities have seen minimal changes.
The report discusses three risk scenarios based on historical conflicts in the region, with varying degrees of disruption. In the event of a “small disruption,” equivalent to the reduction in oil output observed during the 2011 Libyan civil war (about 500,000 to 2 million barrels per day), oil prices could rise to a range of $93 to $102 a barrel in the fourth quarter.
