Morgan Stanley Warns Of $100 Oil, World Economy To Be Crippled By Lack Of Oil And Gas Investments

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Morgan Stanley's chief commodity strategist Martijn Rats writes that the global oil supply is likely to peak even earlier than demand. And as prices search for the level at which demand erosion kicks in, he is increasing his Q1 2022 Brent forecast to $95/bbl, while also lifting his long-term forecast from $60 to $70/bbl.
The note from the Morgan Stanley commodity strategist focuses on arguably the two key drivers in the oil market: peak demand and peak supply. As Rats explains, while the planet puts boundaries on the amount of carbon that can safely be emitted - and therefore, oil consumption needs to peak - this is such a well-telegraphed prospect that it has solicited its own counter-response already: low investment (especially in conjunction with ESG pressures to curb fossil fuels). The question has therefore become: which will actually peak first? Supply? Or demand?
We are experiencing the early phases of runaway inflation. On what seems like a daily basis, we observe critical inputs into our economy going vertical in price. If you crimp the supply of critical inputs with no workable plan to replace them, inflation is the unavoidable outcome. Energy is stuff. Energy is life. What’s the price elasticity of demand for life, and who can afford to pay it?