WTI crude is at $116 and going higher. $150? $200? Who knows. There are several key factors that support higher prices:
- Summer vacations for most states begin in June which will obviously put upward pressure on the price of oil.
- The ongoing war between Russia and Ukraine will provide a floor for high oil prices. It makes sense for Russia to play the waiting game as the U.S. can’t write $40 billion checks in perpetuity. This war could persist for months/years.
- China has yet to emerge from the latest round of COVID lockdowns. When locals are allowed to drive and travel freely, this will place significant upward pressure on the price of oil.
As the price of oil marches higher so will CPI/inflation. Therefore, we expect that the Biden Administration will default to its anti-free market tendencies and institute price controls on oil derivatives. Get ready for long lines at the gas pump this summer. It will feel like the 1970s all over again.