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Will Oil Hit $200 Per Barrel? Some Say Yes

Oil is currently trading at $123.61 per barrel for Brent crude, which is part of the reason why gas prices have been creeping skywards over the past few months. While the factors determining the cost of a barrel of oil are remarkably complex, this much is easy to understand: pricing is still very much a matter of supply and demand. Reduce supply, and prices go up. Increase demand, and the same thing happens.

Although current global output is up, so is global demand. Put another way, gas is expensive in Ohio because more people in Beijing are driving cars. That’s not likely to change any time soon, so unless worldwide oil production skyrockets, the price of gas isn’t likely to get significantly lower. Even tapping into the strategic petroleum reserves held by the U.S. (a tactic tried last June) will only have a minor impact on pricing; last year, it lowered prices for a few days, but they spiked higher less than a month later.

If crude oil pricing does jump to the $200 per barrel mark discussed by CNBC, expect to see a significant price increase at the pumps. While gas prices may not rise in the same linear manner as barrels of oil (since many factors go into pricing a gallon of gas), it’s likely to expect that $200 per barrel crude would result in gas prices above the $6.00 per gallon mark.

Since the price of oil impacts everything from the cost of food and consumer goods to airline travel, we could be in for a very unpleasant blow to an economy that has yet to regain its footing.

Image credit: Flcelloguy at the English language Wikipedia

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