Could oil prices continue their downward path? A recent report from Credit Suisse predicts that oil could hit $50 per barrel in the case of a severe credit crunch.
Looking at a worst-case scenario – namely, a repeat of the slowdown of 2008’s Great Recession precipitated by a crisis of confidence involving Europe - the analysis argues that demand would fall along with trading activity and that any recovery would be “halting fragile and painfully slow.”
The report points to the fall in oil prices witnessed in 2008, when Brent prices plunged from a record high level in the space of a few months.
The analysts explain that the $50, “end is near” scenario “is simply a fatalistic repeat of history on the premise that what was broken three to four years ago has not been fixed."
"Indeed, global imbalances are worse and much of the available political and real capital has merely been squandered in the interim,” they added.
Given the still-plentiful supply and U.S. dollar strength in this scenario, Credit Suisse forecasts a price recovery around $80 by 2013.