Oil prices could spike above financial-crisis records and spark an economic downturn, top energy consultant says

• Oil prices could break above their financial-crisis peak of $147, Bob McNally says.
• He says prices will keep rising unless supply starts flowing through the Strait of Hormuz again.
• The founder of Rapidan Energy Group predicted the peak could come within weeks unless supply is restored.

The pain in oil markets can continue, according to a top energy consultant who thinks the price of crude could soar to levels last seen during the 2008 crisis.

Bob McNally, the president of Washington, DC-based Rapidan Energy Group and a former White House energy advisor in the George W. Bush administration, said he believed oil prices have a lot more room to rise amid supply disruptions created by the Iran war.

Speaking to Business Insider on Wednesday, he outlined a scenario in which crude prices surpass their peak during the last financial crisis within several weeks' time, assuming there is no end to the conflict and some of the lost supply isn't restored to the market.

Brent crude, the international benchmark, has soared 80% this year, largely due to the Iran conflict. Assuming oil prices surpass their 2008 high of $147 a barrel, Brent could rise another 35% from current levels.

"I think it's in the high triple-digit range," McNally told Business Insider of how high oil prices could conceivably go, though he noted that much of the future outlook is still uncertain.

"They grind higher until they cause pain, enough pain to slow the economy and demand dissipates, and we get a free fall," he added, speculating that once oil prices peak, the US could see economic data take a hit.

Markets have been fretting over the impact of higher oil prices since the war began, but in reality, the price of crude oil — even at $100 a barrel — remains well-below the economy's "pain threshold," McNally said.

Oil will continue to climb higher unless one of two things happens, according to McNally, though he noted that he sees both as unlikely.

1. The US and Israel reach a ceasefire agreement with Iran

A ceasefire would be one way the oil surge could end. If the US and Israel were to reach a deal with Iran, the supply of crude and other energy products could begin flowing through the Strait of Hormuz again.

"The problem is it takes two to ceasefire, and the Iranian regime is not ready to ceasefire yet," he said.

2. The US degrades Iran's ability to threaten oil shipping

Another way to get a lid on prices would be for the US to hinder Iran's ability to obstruct the Strait of Hormuz. The US could target anti-ship cruise missile batteries, drone bases, and artillery, McNally said, though that effort could take weeks to carry out.

The US could also use escorts to help tankers cross the Strait, boosting supply, but that also looks unlikely to be effective at the moment.

"After you pummel Iran for weeks, then you have escorts. You don't put escorts up front because they will get attacked by the facilities we haven't destroyed yet," McNally said.

With no supply increase in sight, the only path forward for oil prices is up, he suggested.

No one knows the price level at which demand destruction could occur, but it could be higher than some consumers expect, given that oil products, like gas, are a consumer staple, McNally suggested.

"We can't do without gasoline, so we have to pay it," he said.