In this segment of Backstage Pass recorded on Jan. 26, Fool contributors Rachel Warren, Jason Hall, and Connor Allen discuss their thoughts on crude oil prices.
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Rachel Warren: Today, CNBC reported the global oil benchmark had topped $90 for the very first time since 2014. This is due to a variety of factors. There was a quote from CIBC Private Wealth, Rebecca Babin saying that potential sanctions on Russia which would be triggered by Ukraine invasion could be a catalyst for higher crude prices.
We also know that there has been a lot of underproduction particularly since the pandemic started.
What do you guys think of this news? We can make some wild predictions as we often do on this show. Do you think crude oil will be over $90 or under $90 at the end of 2022? Jason.
Jason Hall: I think there's a lot of things going on that could push oil prices well above a $100 a barrel. These aren't things that happen starting in March 2020. Yeah, March 2020, all the oil producers in the world race to the pump jacks with the wrenches to turn off as much production as they can when global demand fell 30%, everybody did. But you know what happened the five-years before that? Nobody was investing in developing offshore resources.
Nobody was investing in developing some of the bigger plays outside of North America. It was all about fracking, it was all about tight oil that you have to constantly drill new oil wells all the time just to maintain production.
We're paying the price for that now. A lot of those resources that cost billions of dollars to develop and take 5, 10, 15 years to develop, we haven't been developing them for a long time.
That's going to put a ton of pressure potentially on supply, and that could be a real serious catalyst for oil prices.
But Saudi Arabia and Russia could get into another oil spat like they did at the beginning of 2020 that nobody remembers about, [laughs] flood the market with a bunch of short-term oil that could crater prices.
They've done it before, they could do it again. When you've got two titans fighting over it, all bets are off. Connor.
Connor Allen: Yeah, mine goes along with you.
Jason Hall: I'm taking the over by the way.
Connor Allen: You talked about, Jason, how the investment into oil drilling really slowed down in the past five years. I think that can be shown by, it seems like the Western world is minimizing their focus on oil drilling, especially in the U.S. You've also got a ton of unrest in Libya, in Kazakhstan. I'm going to take the over $90. GasBuddy, which is a fantastic application.
If you don't have it on your phone, it helps you get lower gas prices, but they're predicting an average of four dollars a gallon by the end of the year. A lot of times we could see higher gas prices in the spring and summer. I don't know it's total gas, but I'm just going to say the over.
Rachel Warren: Yeah. I tend to agree with both of you based on what we've been seeing. There was an interesting estimate out from JPMorgan recently saying that crude oil prices could soar to $125, so actually way over per barrel in 2022 and $150 in 2023 because of OPEC's limited capacity to boost production.
This could be the beginning of a bit of an upward trajectory for those prices. Definitely something to keep track of for sure, particularly if you're interested in investing in this space.