Analysts warn of recession if oil prices continue to surge further into ‘uncharted territory’

Analysts warned that the ban on Russian oil could cause food and oil prices to go up even more.

Lipow said that if Russia retaliated by refusing to supply Europe with oil, it could send oil prices up another $20 to $30 per barrel. If Western countries targeted its energy sector, Moscow threatened to cut Europe off from its gas supplies.

After President Joe Biden announced a ban on fossil imports from Russia, U.S. crude traded above $128 per barrel, while global oil prices jumped above $130 per barrel. The U.K. and European Union said they would stop using Russian fossil fuels. Prices have been going up in recent weeks and are not seen since 2008.

I fear that these prices will cause a recession in Europe and Latin America, which will affect China's ability to sell consumer goods to the rest of the world.

Russia supplies as much as 40% of Western European gas consumption by the year 2021, according to statistics from Goldman Sachs.

In a worst case scenario, a complete ban on Russian energy imports in all major consuming countries would cause a significant reduction and disrupt energy supply.

Inflation in advanced economies would end the year at around 5% as opposed to the 2.4% we forecast prior to the invasion, and the effects of the drop in households would push the euro-zone.

In theory, oil flows could be rearranged to alleviate the tight supply in the West, but it may not work, according to Jan Hatzius.

If Western countries buy less Russian oil, China and India could buy more Russian oil and less Saudi and other oil, which would flow to the West.

The rearrangement of the deck chairs isn't perfect, not only because of increased transport costs and other technical frictions, but also because China and India may be reluctant to increase their imports and corresponding payments.

Oil prices have jumped by more than $20 a barrel and Goldman sees potential for further gains. According to Hatzius, the investment bank believes that oil prices will lower real GDP by 0.6% in the euro zone.

Matt Smith, lead oil analyst at Kpler, told CNBC on Wednesday that self sanctions would increase the pressure on energy markets.

He said that before the sanctions were announced, a lot of U.S. companies would have stopped buying Russian crude oil products. Shell was lambasted for buying Russian oil at discounted rates. It apologized and said it would stop buying Russian oil and gas.

I think self sanction is starting to kick in. The buying is being halted, Smith said.