Investors Warn of Skyrocketing Oil Prices
Hermitage Capital's Bill Browder and billionaire George Soros are warning that geopolitical events could send oil prices through the roof in the coming months, perhaps topping $200 per barrel.
The two used a technique known as regression analysis, which uses figures from past oil shocks to simulate a future shock, to create their forecasts. Through this method, they created six distinct scenarios for oil shortages.
Browder and Soros cite the escalating confrontation with Iran, the willingness of Russia to shut off supplies (as it did with natural gas to Ukraine), and a possible embargo by Venezuelan leader Hugo Chavez as factors that could send prices over $100 per barrel. Other variables include continuing unrest in Nigeria, Algeria and Iraq. The most unsettling (though unlikely) doomsday scenario the two offer involves an overthrow of the House of Saud, which they say could send oil to $262 per barrel.
In that event, Browser and Soros say, the West would be forced to implement crash conservation and alternative energy programs, and the political and economic ramifications would be severe. However, critics of the critics' forecasts say that OPEC would never allow such a level of disruption, if only to prevent global cuts in oil consumption that would hurt members' revenue.