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How a Potential Rise in Oil May Affect Profits

Marco Dunand, CEO of Mercuria Energy Group, stated recently that we could see a possible rise in oil prices due to high demand. This demand comes from economies around the world reopening, while starting to recover from Covid-19 as well as a continual decrease in supply. Marco stated that while oil is expected to hang around $80 to $90, we could see a potential rise to $100 a barrel this winter.

Richard Martin, the managing director of IMA Asia, has predicted that this potential rise in oil prices will affect company profits. Martin believes that companies will be unable to raise their selling prices as much as needed, even though the money that companies will be putting in will increase with the price of the oil. This leaves their profit margins to be the only place they could pull money from.

This news is particularly worrisome for China. They are the one of the world’s leaders in producing renewable energy sources. However, to produce renewable energy, they must rely on oil and gas, leading them to be one of the world’s largest polluters.

In class we have discussed the interconnectedness of companies and government. With so many countries relying heavily on oil, an increase this much may wreak havoc on economies around the world. It is only with countries switching to renewable energy will there be less of an effect on the global economy. Do you think this sudden increase might prompt more and more countries to switch to renewable energy faster?

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