Here’s how much oil could go up in a worst-case scenario with the west freezing Russia out, BofA says. It’s a lot

The surging price of oil is now the most significant risk to U.S. economic growth in 2022, Bank of America Research wrote in a note on Friday.

In a March 4 note to clients, Ethan Harris, the bank’s head of global economics research, detailed a scenario in which U.S. GDP growth could be cut by 1% over the next year if oil prices remain above $100 per barrel amid Russia’s invasion of Ukraine.

The bank’s analysts said an even higher cost might even be in the cards if the U.S. or NATO move to curb Russian energy exports altogether, forecasting a shocking $200 barrel of oil. A rise in oil prices of that level could lead U.S. GDP growth to take a 2% hit in 2022, Harris believes.

“If West cuts off most of Russia's energy exports it would be a major shock to global markets,” Harris wrote.

Harris’ team stressed this was only one possible scenario, given the difficulty in predicting how different countries will act in the future. “We want to emphasize that this is a scenario and not a forecast,” the bank said. “However, the outlook is highly uncertain and investors need to consider the range of risks.”

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Another bank, JP Morgan, also cautioned investors about the impact of rising oil prices on U.S. and European economic growth over the weekend.

“The consequences of a complete shut-off of Russia’s 4.3 (million barrels per day) of oil exports to the U.S. and Europe would be dramatic,″ the bank wrote in a note to clients, per CNBC.

Oil prices have remained above $100 per barrel for the first time since 2014 amid Russia’s full-scale invasion of Ukraine in late February. Before the invasion, Russian exports represented roughly 7% of the total global oil supply. The loss of those exports has had serious effects on the market.’

While U.S. gross domestic product grew at an impressive 7% in the fourth quarter of 2021, expectations for 2022 have seen repeated downward revisions of late.

In February, 36 forecasters surveyed by the Federal Reserve Bank of Philadelphia predicted real GDP will grow at an annual rate of 1.8% in the first quarter of 2022. That’s down 2.1 percentage points from the 3.9% predicted in the previous Fed survey. The more pessimistic outlook from forecasters comes despite the U.S. economy adding 678,000 jobs in February and a historically low unemployment rate of 3.8%.