It has taken a relatively modest 13.83% jump in the price of Brent crude in February for optimism to go up in flames. What now?
Consider some facts highlighted in a recent report by investment bank Nomura. Fact one: oil prices were up 128% during the Arab-Israel war of 1973, when Opec became a potent force. Fact two: the Iranian revolution of 1979 sent oil prices up by 77%. Fact three: the 1989 Gulf war saw oil prices jump by 109% in the two months of actual fighting.
What this means is that trouble in oil-rich regions could mean a doubling of crude oil prices. The rise in crude oil prices this month seems piffling in comparison. The analysts at Nomura have said that the experience of 1989 suggests that crude oil prices could touch—please hold your breath—$220 a barrel.
It’s a provocative thesis that may not be tested. But the sheer uncertainty in the Arab world right now is surely worrisome.