Crude oil at $250 per barrel?

You should never make predictions, especially about the future


Let us contemplate the scenario in which oil price does rise to $250 per barrel and stays there for an extended period. It would lead to a major global economic recession and possibly a depression. In the US, gasoline prices would rise to $10 per gallon and in India, the price of petrol could rise to Rs 75 to Rs 150 per litre, depending on the subsidy levels, with serious negative economic consequences. The high oil price will also further fuel the inflationary fires all over the world.

Central banks will be forced to raise interest rates to fight inflation and thereby slowing the economies even further. The increased diversion of agricultural outputs to produce biofuels and high cost of fertilisers could lead to very high food prices and shortage of food. The worst affected will be the poorer countries which will be faced with recession, high inflation and shortage of food perhaps even famines.

Economic Times