UBS: Oil Could Spike To $100+ A Barrel, A Much-Needed Bailout For Russia

Kremlin / Public Domain

Should the rising price of oil continue unabated, the U.S. could see another recession, but Russia stands to benefit.

Swiss investment bank UBS said Tuesday that rising oil prices could usher in another recession in the United States should the per-barrel price hit $100, but this grave prediction for the U.S. would mean good things for Russia.

The price of oil has climbed to its highest point since 2014, according to the Wall Street Journal, and Russian President Vladimir Putin is banking on this newfound wellspring of cash to shore up support among his people – who want Putin to engage in more social spending after investing heavily on the military for the past several years – and counter the effects of U.S. sanctions.

“He thinks that the Russian economy has stabilized and sees Russia now in a long-term battle of wills with the West,” said Timothy Ash, senior strategist at BlueBay Asset Management in London. “Higher oil prices will help him play for more time against the West.”

But the U.S. will see no such celebration should the price of a barrel hit $100: Five of the last six recessions in America were preceded by oil spikes, according to UBS.

CNBC reports that the bank’s economists have warned the surge could continue for numerous reasons:

A deal among OPEC, Russia and other producers to cut output and drain a crude glut has shrunk oil stockpiles. Meanwhile, geopolitical tension and U.S. sanctions on Iran and Venezuela are creating uncertainty about future oil supply. Finally, while U.S. production is surging, it can't keep pace with growing demand, and UBS thinks underinvestment in big oil projects will start to impact supply next year.

Russia’s Energy Minister Alexander Novak said earlier this month that Russia remains committed to the deal with OPEC:

“We’re adhering to it, we’re set to it,” he said. “It’s 100% our aim.”