If Oil Prices Rise the EU May not Survive

Kicking an economy when it’s down!

The European Union may be asking when it will all end? Having not yet fully recovered from the banking crisis the EU is likely to now suffer at the hands of high oil prices.

Analysts are divided as to how long, and how big, the US shale oil boom will last for. PricewaterhouseCoopers believes that shale oil production will continue to grow, flooding the market with oil and sending prices 40% lower than current levels by 2035. Other analysts believe that the US shale boom will begin to decline over the next few years, at which point European Prices will become very susceptible to OPEC output, which they also believe will decline, sending prices soaring.

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Daniel Lacalle, the senior portfolio manager at investment management firm Ecofin, believes that “oil prices as they are right now are going to be unsustainable. There is all this 'oomph' about shale oil, but it does not alter the fact that there is still a shrinking amount of exportable capacity in OPEC and that's what drives the supply and demand scenario for the European Union.

I think Brent getting stronger to WTI (light sweet crude) is a very likely picture in the coming months.”

The EU is far behind other developed nations when it comes to their stage of recovery after the global financial crisis, and if it comes down to a battle for oil supplies as prices increase then they are unlikely to be able to afford enough supply to meet their needs.

By. Joao Peixe of Oilprice.com