“If more Western countries join the U.S. and impose oil embargoes on Russia, it would create a 4.3 million barrels per day hole in the market that simply cannot be quickly replaced by other sources of supply,” says Bjørnar Tonhaugen, head of oil markets at the Oslo-based energy research firm Rystad Energy, in a note on Wednesday.

Rystad’s new $240-a-barrel forecasts were echoed in predictions by Goldman Sachs and Barclays earlier this week. 

Goldman hiked its crude price forecasts for Brent oil to above $200 on Tuesday, noting the world could be facing one of “largest energy supply shocks ever.” Barclays, a bit more optimistic, noted disrupted Russian seaborne crude supplies in its worst-case scenario could push prices above $200, but called the situation “highly fluid” and did not revise its 2022 forecast for Brent crude oil.  

Russia’s Deputy Prime Minister Alexander Novak said on state television Mar. 7 that Western countries could face oil prices of over $300 per barrel, threatening “catastrophic consequences for the global market,” if Russian oil is cut off. However, those views have not been corroborated by major independent oil watchers. 

While Novak’s comments appear to be threats made to stop the U.S., U.K., and EU from sanctioning Russia’s oil supply, Tonhaugen does agree oil prices rising above $200 will have serious consequences.

“Oil at $240 per barrel would trigger a global recession,” he said. 

Global recession

Hovering around $130 a barrel this past week, oil is already nearing its highest price in history—the all-time peak was in July 2008, when crude oil peaked at $147.02.

That’s concerning because almost every global postwar recession has been preceded by a similar rise in oil prices, according to 2007 paper published by economists at the University of Warwick. The cost of crude rose sharply in 1973, in 1979, in 1990, and in 2007, all years that were followed by recessions.

A recession is likely to happen again, according to Tonhaugen, who also adds that when oil becomes too expensive for people and governments to afford, it can trigger something called “demand destruction.” That means that consumers and nations stop using oil when the price spikes, and they don’t return to it even when prices go down again. 

“It is clear that oil prices will continue to rise until they reach an unsustainable level that curtails demand,” says Tonhaugen. 

But one thing Rystad and most other analysts, traders, politicians, and anyone watching the oil markets are saying is that this feels like nothing seen before.

“This is the largest energy crisis in decades, and the impact on the world’s most important commodity is going to be unprecedented,” Tonhaugen says.