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An update to these projections was published on March 31, 2009.
News release | Update (PDF)

Geopolitical and regional tensions could disrupt oil supply with potentially serious downside risk for developing countries

The baseline scenario assumes that the recent declines in oil prices do not reverse themselves and that oil prices gradually move toward a long-term level of about $80 dollars at today’s prices.

However, if international tensions (or internal tensions within an important oil exporter) intensify and a serious disruption to global supply ensues, prices could rise much higher, with potentially significant impacts on output.

In particular, a prolonged blockage of the Strait of Hormuz, although a low probability event, could send oil prices soaring. Some 17 mb/d of crude and products transit the strait (an average 14 crude tankers daily, with another 14 returning empty). Although alternative routes for some Middle-East oil could be found and any disruption is likely to be temporary (see Commodity Annex for more details), a net 13 mb/d or 15 percent of global demand could be disrupted for several months and would likely be only partially offset by release of strategic reserves.

Evaluating what price oil might reach under such a scenario is highly uncertain, but economic impacts would be serious – even if peak prices are short-lived and adequate supply is restored. World Bank Group simulations suggest that a sustained $50 increase in oil prices could reduce global GDP by around 1.3 percent in oil-importing countries (figure 18). A more detailed discussion on the impact of higher oil prices is presented in box 6.

Figure 18. A major oil shock should cut sharply into global growth
Simulated impact of a $50 increase in oil prices
Source: World Bank.

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