Brent crude prices could soar to $160 a barrel if the US or other nations step in to prolonged military operations against the Syrian regime of President Assad in response to his use of chemical weapons against civilians.
However, Bank of America Merrill Lynch, which made the hawkish forecast, agreed a massive spike in oil prices was a worse –case scenario, explaining a series of airstrikes was more likely.
In such an event, prices are likely to leap to around $115 to $120 a barrel, says the bank.
Fears of military intervention in Syria have relaxed as Russia tries to broker a peaceful solution to the outrage.
An illustration of how oil prices affect the daily lives of almost everyone on the planet.
Oil guzzling companies
Companies that guzzle millions of gallons of fuel have gained the most from the efforts of Moscow to persuade Syria to toe the line in dealing with civilians.
The price of Brent crude, pumped out of the North Sea, is the global benchmark for oil prices.
Although the Bank of America has made price predictions at the upper end of the scale, more conservative estimates put the cost per barrel at around $109 for the rest of the year, and $102 going into 2014.
International Airlines Group – owners of British airways and Iberia – easyJet, Ryanair and cruise liner operator Carnival have a huge appetite for oil to keep their businesses on the move, and a slight jump in price makes a big difference to their slim margins and bottom lines.
To save money, airlines are investing in aircraft that drink less fuel and Carnival has cut consumption by 25% in the past eight years.
Falling demand
Garry White, chief investment commentator at financial manager Charles Stanley, explains that investors can see how the price of crude leaks through to their portfolios even if they have no money directly in the commodity.
For instance, he says, companies like Rolls Royce, which makes the engines for the planes the airlines want to buy benefits from the orders, as does GKN, a major airframe maker.
High oil prices benefit no one, even oil companies.
As the price spikes, then demand falls as consumers cut back.
“Everyone, including BP and shell would rather see the price stick around $100 a barrel than go higher or fluctuate,” said White. “Companies that consume a lot of oil are dependent on the price of crude, even if their products are derivatives.”
