Posted by: mulrickillion | January 1, 2012

Fears About Iran and an Economic Recession Show Why It’s Hard to Predict the Price of Oil in 2012

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Eric Lo / Getty Images

Crude Forecast: Get Ready to Ride the Roller Coaster on Oil Prices in 2012

By Bryan Walsh, Ecocentric – Time.com, Dec 30, 2011 —

Oil is the bad boyfriend of the international economy: we can’t live with it, and we can’t live without it. We complain about the price of gas—which really is crippling middle-class America—and worry about the threat of oil spills and all the greenhouse gases released by the 30 some billion barrels of oil we burn annually, yet oil is still a driving energy source for the economy, from family units all the way to nation-states. And it really has gotten more expensive—this year Brent crude ended up averaging $111 a barrel, the highest price on record, and except for 2008 (in the middle of a global recession), oil prices have closed higher every year for the last decade. With global demand still rising as fast-growing developing nations like China and India continue to fill up at the pump—and global supply growing much more slowly—it’s easy to assume that those prices will just keep climbing.

But the picture is more complex than it seems. As we leave a tumultuous 2011 and enter an uncertain 2012, it certainly looks like oil will get more expensive—perhaps significantly more expensive, if Iran moves to close the Strait of Hormuz as it’s been threatening, potentially blocking off as much as 15 million barrels a day. Even if the U.S. Navy prevents Iran from closing off the Hormuz spigot—as the Fifth Fleet has promised to do—the possibility of armed conflict in the Persian Gulf would surely send oil traders into a panic. Yet there’s also the chance that oil prices could fall—and fall very, very far. There’s just one catch: it would require another global recession. . . .

Fears About Iran and an Economic Recession Show Why It’s Hard to Predict the Price of Oil in 2012 | Ecocentric | TIME.com

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