How expensive could oil be?

THE The price of oil exceeded $ 80 a barrel for the first time in three years. And with the shortages, growing demand, and the whispers of all the makings of a potential global energy crisis, those rumors of $ 100 a barrel are flying again.

Yesterday, Brent crude, the international benchmark, rose 0.8% to $ 80.19 a barrel, hitting a three-year high for the second day in a row and pushing the price of crude nearly 55% above from what it was around the same time last year.

Rising demand shouldn’t come as a surprise. The International Energy Agency has long predicted that consumption in 2022 will be about 5% above 2020 levels, when successive pandemic shutdowns saw demand for oil drop sharply around the world.

It now seems conservative. And more importantly, with a cocktail of factors in the mix that suggest gas prices could hit record highs in the weeks to come.

Just 18 months ago, oil recorded its first negative price for the first time in history. The price of the US benchmark West Texas Intermediate (WTI) oil fell nearly 300% in April 2020 to trade around -37 $ per barrel.

But three months ago, Brent crude, already up 48% since the start of the year to 76 dollars a barrel, went in the opposite direction. And it was also around this time that a meeting of OPEC members and allies (Opec +) ended in stalemate, after Saudi Arabia and Russia asked producers to increase production in the goal of mitigating the rise in oil prices. A requested extension of an existing supply agreement to ensure stability as the world reopens after the global lockdown has met with a no.

And now, alongside a decline in global gas production, which includes well below average U.S. inventory levels, as we head into the peak year-end consumption period, there is also a Growing competition between Europe and China, which, with a concerted effort in China, to curb pollution from heavy industry, is expected to push crude higher as industries turn to using petroleum for generate electricity.

All of this makes talking about $ 100 a barrel start to seem less mythical and more likely.

None of this will appeal to motorists who, when they can find fuel to fill their tanks, are also likely to have to pay more. But as an investor, we are living in an interesting time, especially given the potentially important role in promoting the necessary climate action plans. A topic on the agenda ahead of the November world leaders meeting at COP26 in Glasgow.

To learn more about sustainable investing, visit Fidelity’s Sustainable Investment and ESG Center.

Five-year performance

(%) As of August 31

2016-2017 2017-2018 2018-2019 2019-2020 2020-2021
Brent raw 6.7 47.7 -21.9 -25.0 61.1

Past performance is not a reliable indicator of future returns

Source:, in USD as of 8/31/21

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