Oil prices could climb to anywhere from $200 to $400 per barrel over the course of the next two years, imperiling the world economy and potentially leading to another collapse, according to one analyst.
The report, authored by Philip K. Verleger (adviser to both Congress and global consulting firm Brattle Group), attributes the likely rise in oil prices to several factors, including economic sanctions on Iran, low reserves and a coming mandate for low-sulfur diesel fuel use in global shipping
At its core, the issue is one of crude oil supply and refining capacity. Sanctions against Iran will reduce the former, and with reserves low, could alone potentially push crude prices up to nearly $100/barrel.
The analysis has been corroborated by investment bank Morgan Stanley, the Washington Examiner reports.
The effect of the low-sulfur diesel mandate will be felt on the refining side, where Verleger warns the bottleneck could be particularly severe, as there is not sufficient capacity to meet the demand of both international shipping and existing road (farm, shipping, etc.) use. The new regulations are set to go into effect January 1, 2020.
To supply global demand, “[R]efiners will have to boost production of low-sulfur gasoil and fuel oil, according to most studies, by around two million barrels per day,” Verleger said.
“If nothing changes, the 2020 diesel and gasoil crisis will occur because as many as half of world refineries cannot produce fuel that meets the new regulation.”
“These ‘simple’ facilities produce significant volumes of high-sulfur fuel oil. The mix of products produced from such refineries is dictated by the type of crude processed,” Verleger warned.
Oil prices could climb to anywhere from $200 to $400 per barrel over the course of the next two years, imperiling the world economy and potentially leading to another collapse, according to one analyst.
The report, authored by Philip K. Verleger (adviser to both Congress and global consulting firm Brattle Group), attributes the likely rise in oil prices to several factors, including economic sanctions on Iran, low reserves and a coming mandate for low-sulfur diesel fuel use in global shipping
At its core, the issue is one of crude oil supply and refining capacity. Sanctions against Iran will reduce the former, and with reserves low, could alone potentially push crude prices up to nearly $100/barrel.
The analysis has been corroborated by investment bank Morgan Stanley, the Washington Examiner reports.
The effect of the low-sulfur diesel mandate will be felt on the refining side, where Verleger warns the bottleneck could be particularly severe, as there is not sufficient capacity to meet the demand of both international shipping and existing road (farm, shipping, etc.) use. The new regulations are set to go into effect January 1, 2020.
To supply global demand, "[R]efiners will have to boost production of low-sulfur gasoil and fuel oil, according to most studies, by around two million barrels per day," Verleger said.
"If nothing changes, the 2020 diesel and gasoil crisis will occur because as many as half of world refineries cannot produce fuel that meets the new regulation."
"These 'simple' facilities produce significant volumes of high-sulfur fuel oil. The mix of products produced from such refineries is dictated by the type of crude processed," Verleger warned.
