Could Oil More Than Double From Current Levels?
According to Michael Lo of Nomura Securities, oil prices could rise up to $220/barrel in the near-term thanks to the current situation in the Middle East and North Africa.
In his sensational call that has quickly grabbed headlines throughout the world, Lo claims that if Algeria follows Libya and falls into disarray, then oil has the potential to push past the $200/barrel mark. Lo says that if Libya and Algeria halt their oil production altogether, then oil may hit $220/barrel.
In his call, Lo compared the current situation in the Middle East and North Africa to the 1990-91 Gulf War. A Wall Street Journal article noted earlier today that oil rose 130% in two months around that time.
For what it's worth, a number of publications have come out today and slammed Lo's research report, calling it sensationalistic and ill-conceived.
It was only a matter of time before someone issued another headline-grabbing prediction for the price of oil. It's a risk worth taking for almost any analyst - if the price of oil ends up hitting $220/barrel, then Michael Lo ends up looking like a genius and will be able to take a high-paying position at another firm. If the price of oil stops its parabolic rise and doesn't come close to $220/barrel, then people will likely forget about Lo's call anyways. Besides, his call wasn't really a call - it was a bunch of conjecture. "If this happens and that happens, then oil could hit $220/barrel". It certainly wasn't a "I believe that oil will hit $x by this date" type of call.
If oil does hit $220/barrel, then driving across the country for that family vacation is going to be extremely expensive.