WTI crude could surge $25 to 2008 record levels, Bison says

Josh Young of Bison Interests warns the market is underpricing escalation risk, with WTI poised to rally $20-$25 to match 2008's inflation-adjusted peak.

WTI crude oil could rally another $20 to $25 a barrel in the short term, reaching 2008's inflation-adjusted record, as escalating geopolitical risk triggers what one analyst called demand-destruction pricing.

"The market is underpricing the escalation risk embedded in current supply routes, and demand destruction is the mechanism that eventually clears the market," Josh Young, chief investment officer at Bison Interests, said.

Prediction markets have already priced in a 35% probability of $120 oil within six months, according to Kalshi data. The surge in bullish bets comes as supply disruptions from the Middle East and OPEC+ production cuts totaling 5.86 million barrels a day squeeze spare capacity to roughly 3 million barrels a day, the lowest since 2022.

A sustained move above $120 would add roughly 1.5 percentage points to global headline inflation, according to Oxford Economics estimates, potentially forcing central banks to delay or reverse planned rate cuts. The last time WTI traded above $130 on an inflation-adjusted basis was July 2008, when the global economy was already tipping into recession.

The rally in crude has accelerated over the past four weeks, with WTI gaining more than 12% as fighting in the Gulf disrupted tanker routes and raised the specter of a broader conflict involving Iran. The U.S. military has released footage showing forces boarding one tanker, while Iran said it has stopped retaliatory operations but warned the war could expand if U.S. strikes continue. The White House has deployed additional naval assets to the region, according to a Pentagon statement, further tightening an already strained supply chain.

Young's forecast implies a return to the inflation-adjusted peak of 2008, when WTI hit $147.27 a barrel in nominal terms — equivalent to roughly $215 in 2026 dollars. A $20-to-$25 surge from current levels would put WTI in the $145-to-$150 range, a threshold that has historically triggered demand rationing across airlines, trucking and petrochemicals. U.S. gasoline prices, which have already risen 18 cents over the past month to a national average of $3.72 a gallon, would likely follow crude higher, adding pressure on consumers.

Supply Squeeze Meets Demand Shock

The supply backdrop is tightening at the fastest pace since the Russia-Ukraine conflict began in 2022. U.S. shale output has plateaued at about 13.1 million barrels a day, according to the Energy Information Administration, while the International Energy Agency projects global oil consumption will rise by 1.1 million barrels a day this year, led by non-OECD economies. OECD commercial inventories have drained to 2.71 billion barrels, about 4% below the five-year average, EIA data show. Any further disruption — whether from a Gulf escalation, a hurricane in the Gulf of Mexico or a pipeline outage — would draw down stocks even faster, amplifying price spikes.

The U.S. oil rig count has fallen to 482, down from 621 a year ago, as drillers prioritize shareholder returns over output growth, Baker Hughes data show. That structural underinvestment in new supply means even a modest demand shock could have outsized price consequences.

Inflation Risk Looms Over Central Banks

Oxford Economics estimates that every $10 increase in crude adds 0.4 percentage point to U.S. headline CPI over a six-month lag. A $25 surge would therefore add a full percentage point to inflation, potentially delaying the first Federal Reserve rate cut beyond December. The last time oil prices triggered a macro policy shift was in 2022, when WTI averaged $94.50 a barrel and the Fed embarked on its most aggressive tightening cycle in four decades. If the conflict in the Gulf escalates further, the timeline for monetary easing could shift even later into 2027.

For energy investors, the rally has already boosted the sector. The Energy Select Sector SPDR Fund has gained 14% over the past month, outperforming the S&P 500 by more than 10 percentage points. But Young cautioned that the move higher may be front-loaded, with demand destruction eventually capping prices as consumers and industrial users cut back.

This article is for informational purposes only and does not constitute investment advice.