Tags: Brusca | Oil | price | Astronomical Levels

Robert Brusca: Oil Could Rise to 'Astronomical' Levels

Thursday, 22 Mar 2012 07:23 AM

Oil prices could spike at any moment, as demand in countries like India and China are already pushing prices up on top of geopolitical factors, meaning any escalation of tensions involving Iran could send crude soaring to astronomical levels, says Robert Brusca, chief economist at FAO Economics.

Oil prices have frayed nerves many times in the past, especially when tensions in the Middle East have escalated into military campaigns or outright war.

Today, however, factor in rising demand and the seeds are planted for a serious price hike if tensions reach a boiling point with Iran.

"The oil game is a lot different than the last time we had an oil price spike," Brusca tells CNBC.

"We’re underpinned by this growing demand for new sources, and that keeps oil prices from really falling sharply."

Tensions between the West and Iran have sent crude prices rising, especially on Iran's threats to close the Strait of Hormuz, a narrow waterway connecting oil-rich Persian Gulf nations with the rest of the world.

Saudi Arabia has pledged to make up for lost supply stemming from any geopolitical unrest.

"The Saudis are in the midst of a program to pump out and ship a lot of oil to try to drive these prices down close to $100 per barrel," Brusca says.

"I don’t think you can take any price off the table where the Middle East is concerned. If anything were to happen to escalate tension in the area, you could see oil going to levels that would be astronomical."

U.S. crude is currently trading around $106 a barrel.

A stronger U.S. economy is also pressuring prices higher, as a growing country needs more oil and derivatives to expand.

"The market is anticipating additional favorable U.S. economic news," energy trader and consultancy Ritterbusch and Associates says in report, according to the Associated Press.

"And until concerns ease regarding Iranian risk, the market appears capable of maintaining price gains, especially if equities remain strong."

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2012-23-22
Thursday, 22 Mar 2012 07:23 AM
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