Government interference in the economy has long been something anyone who knows even an iota about economics has warned about. Now, regulations could cause oil prices to skyrocket and trigger a global economic collapse.
Oil prices could skyrocket to over $200 per barrel, according to a report by RT. A research paper from economist and oil market watcher Philip K. Verleger predicts that if this happens, a worldwide economic collapse of apocalyptic proportions would occur. According to the paper, there could be a shortage of low-sulfur diesel fuel in 2020 as a result of regulations from the International Maritime Organization (IMO) aimed at cutting sulfur emissions. The regulations, due to take effect at the start of 2020, lower the allowed concentration of sulfur in maritime fuels from 3.5 percent to just 0.5 percent.
The only way to prevent this would be for people to stop fabricating that anyone has any authority to regulate or control them anyway. However, since humanity isn’t ready to give the illusion of control, it looks like an economic collapse is in our near future.
The new regulations have already caused many to begin to scramble for low sulfur options, but unfortunately, the current global refining capacity may not be able to churn out enough low-sulfur fuels to allow for a smooth transition from high-sulfur fuels by the world’s shipping fleet. Since people assume that others have the right to dictate rules to them, this would usher in an economic breakdown the like of which we have never seen. RT reported that the shipping industry accounts for about 5 percent of total global oil demand. Coupled with the fact that most ships burn heavy fuel oil that is high in sulfur, switching over 5 percent of total demand to low-sulfur diesel and gasoil – a distillate similar to diesel – is a massive shift that should not be considered irrelevant.
Other than disobey the “authorities”, ship-owners will have a few options. They could install expensive scrubbers to remove the sulfur, switch to low-sulfur fuels such as diesel or gasoil, or switch over to LNG. Scrubbers and LNG are generally thought to be the most expensive options, requiring capital outlays to overhaul entire fleets. These increased costs will be passed onto consumers in the form of higher prices, and with there being so slowing of the trade war between the United States and China, the final nails could be going in the coffin of the global economy.
By 2020, diesel production will need to rise by at least seven percent, according to Philip K. Verleger. That increase in production is on top of the three percent increase needed for road transport and other uses. All of it will need to be low-sulfur if you believe someone has the right to rule and others have an obligation to obey. “It is not clear that the greater volumes can be produced,” Verleger wrote in his paper. “Instead…very large price hikes may be required to suppress non-maritime use.”
Verleger does not mince words either. As the rules take effect in 2020, oil prices will spike to $160 per barrel or higher. “Economic activity will slow and, in some places, grind to a halt. Food costs will climb as farmers, unable to pay for fuel, reduce plantings. Deliveries of goods and materials to factories and stores will slow or stop,” he argues.“Vehicle sales will plummet, especially those of gas-guzzling sport utility vehicles (SUVs). One or more major U.S. automakers will face bankruptcy, even closure. Housing foreclosures will surge in the United States, Europe, and other parts of the world. Millions will join the ranks of the unemployed as they did in 2008.”