It will hurt more to fall: what do high oil prices lead to

Marcel Salikhov, Director of the Center for Economic Expertise of the Institute of State and Municipal Management, National Research University Higher School of Economics, commented to Gazeta.Ru on the likelihood of the oil market collapse after reaching the price of $ 100 per barrel.

History remembers cases when oil prices rose $ 100 per barrel, and then a collapse occurred, Marsel Salikhov, Director of the Center for Economic Expertise of the Institute of State and Municipal Management of the Higher School of Economics said.

A similar situation was in 2014, and this was largely connected to the fact that shale production in the United States was growing sharply for several years. Expensive oil gave a great financial impetus to the shale industry, investments were made in the development of new technologies, and costs decreased.

However, now there are no serious restrictions in terms of resources in the United States, they, in principle, can produce quite a lot of oil. And if prices rise, the attractiveness of shale production also rises sharply and the likelihood of such scenarios increases, Salikhov specified.

He believes that the main reasons that may affect oil prices are related to the demand factor, the state of the world economy, and the situation with the coronavirus. “In the first half of this year, demand has grown quite strongly. In the second half, it is not yet very clear how the situation will be developed”, the expert said.

Another factor is the OPEC + policy - how the oil-producing countries will continue to act. “The high prices in this year were also due to the fact that OPEC was, in fact, rather slowly returning production to the market,” Salikhov explained.