According to reports, the risks of an American economic recession are increasing. Daniel Yergin, an energy market analyst, believes that the current conflict in Ukraine could lead to major energy problems similar to the 1970s oil crises.
Top economists say the odds of a recession are rising. However, some believe that economic fallout will be’moderate’ and that energy disruptions will be ‘limited and temporary’
Paul Davidson, USA Today’s author, explained Friday in a report how the chances of a recession in 2022 are “increasing amid soaring inflation.” Davidson also stated that “some top economists have raised the likelihood of a slump in the next year.”
The risk of inflation rising despite the U.S. strong job market is increased. USA Today’s author states that energy prices have risen and inflation has reached historical levels. However, Mark Zandi , chief economist at Moody’s Analytics, stated that the impact of Russia’s invasion in Ukraine on the U.S. economic system will likely be “modest.”
Zandi stated that disruptions in the energy markets will be temporary and “limited”. The economist added that it will be different for Russia’s economy which is expected to take a huge hit.
However, the Moody’s economist stated that, if crude oil stays at $100 per barrel for a sustained period of time, U.S. customers will have to pay $80 billion more gas. Lindsey Bell is Ally’s chief market and money strategist and agreed with Zandi’s prediction. She explained that the “impact on America’s economy is not likely to be substantial.”
Vice Chairman of IHS Markit: Energy Crisis “Could Well be on the Scale Of the 1970s”
Some people are not optimistic about the economy. Others believe that the economic downturn will have a significant impact on everyone around the world. CNBC’s Patti Domm recently reported that Daniel Yergin (Vice Chairman of IHS Markit) believes that the world could face an energy crisis similar in nature to that which occurred in the 1970s.
The 1970s energy crisis was caused by the Yom Kippur War in 1973 and 1979 and the Iranian Revolution in 1979. Yergin, a historian of energy markets, stated to Domm that Russia exports 7.5 Million barrels per day of crude oil and other refined petroleum products.
Yergin stated that “this is going to cause a huge disruption in logistics and people will be scrambling to get barrels.” This is a supply problem. It is a logistics crisis. It’s a payment crise, and it could be on the same scale as the 1970s,” said IHS Markit executive and energy market historian:
This crisis could be the most severe since the Arab oil embargo in 1970s and the Iranian revolution of the 1970s.
While this was happening, Patrick De Haan , head of petroleum analysis for Gasbuddy stated that gasoline prices in major U.S. cities would be $5 per gallon “in a couple of weeks”.
De Haan stated that while gas prices are rising nationally, it’s been very ugly. However, California has been the worst affected, with prices exceeding $5 per gallon. Gasbuddy’s petroleum analyst said to Fox that gas prices would “continue to head north” and could reach $5.35 per gallon by month’s end. Yergin, an IHS Markit executive and historian of the energy market, highlighted that current events are extraordinary.
In his interview, Yergin stated that “What we haven’t seen before” is the huge reputational issue of companies not wanting business with Russia. In a matter of weeks, Vladimir Putin has decimated the economy he had built over 22 years. It was essentially integrated with the global economic system. Now Russia has been disconnected from the global economic system,” Yergin said.
