I forecast the price of a barrel of oil could surpass 200 USD in a couple of months if, due to the current crisis, for example, Russian oil exports are banned.
Russia exports 5 million barrels of oil a day. This quantity, according to many analysts, can be replaced only after one or two years as global oil majors and US shale oil drilling companies adjust their drilling capacity.
The "problem" is that oil production companies have paid out most of their profits as dividends to current shareholders. So they have not necessarily enough cash to start exploration and subsequent oil production soon.
Oil production companies have to turn to their existing shareholders and ask them to provide funds for the respective companies to engage in oil exploration and production. And oil production is a very capital intensive business. So there is the probability that oil companies' shareholders could very well prove reluctant to provide large sums of money in the short-term. This issue is exacerbated by the fact that oil mining companies's stock prices are down with substantial margins from the last peak of the price of oil.
Actually, the world could well be witnessing a new golden age for commodities like oil, gas, wheat, corn, soy beans gold, silver, base metals, coal which up till now have been produced mainly by emerging markets like Russia, Brazil, South Africa, Argentina, Ukraine et. This is quite surprising since most commodities' prices have languished compared to 2008 commodities prices levels.
One of the obvious beneficiaries from the possible commodities boom are global commodity production majors like Exxon Mobil, Shell, British Petroleum, Chevron, Bunge, Glencore, Trafigura, Brazil's Vale, etc. However, the commodities trading departments of mainly Wall Street, US based banks will likely experience historic windfalls.
The ones that will suffer most are ordinary people. This, of course, is deeply wrong and there has to be a way to stop always ordinary people baring the cost of any crises. It is the duty of our generation to find a way first to prevent conflicts or at the minimum stop a shadow minority from benefitting from crises.
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Respectfully yours,
Petar Posledovich
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