Oil price exceeds 100 USD - a double shock of the global economy

 Oil price exceeds 100 USD - a double shock of the global economy

Oil prices rose to $100 per barrel for the first time since 2014, raising concerns among analysts that it would be a blow to growth prospects and increase inflation risks.

On the London exchange, the price of Brent crude rose 3.3% shortly after Russia's escalation in the Ukraine crisis, raising fears of disruption to the country's vital energy exports. area. The "black gold" then extended its rally to more than 8%, near $105 per barrel.

While energy exporters may benefit from a boom in oil prices, economies may not be so lucky. Much of the world will be impacted as companies and consumers see their bills rise. This makes spending more tight.

"The rise in oil prices will increase pressure on central banks around the world to implement a tighter cycle of tightening and rate hikes to curb inflation risks," said Chua Hak Bin, senior economist at the US Securities and Exchange Commission. of Maybank in Singapore, said.

Graph of Brent oil price in the last 6 months, with a peak of nearly $ 105 per barrel established today. Photo: Bloomberg

Graph of Brent oil price in the last 6 months, with a peak of nearly $ 105 per barrel established today. Photo: Bloomberg

JPMorgan Chase recently even warned that oil prices could rise to $150 per barrel. This, if it happens, will affect the resilience of the global economy and cause inflation to soar to more than 7%, more than three times the rate most monetary policymakers forecast. .

Oil prices rose along with a broad-based recovery in the prices of basic commodities, like gas. Among them, some fundamental market drivers such as rapidly increasing worldwide demand, geopolitical tensions and supply chain disruptions. Just two years ago, the price of oil futures at one point fell below $0.

Fossil fuels - oil, coal and natural gas - provide more than 80% of the energy of the global economy. According to consulting firm Gavekal Research, the cost of a basket of basic goods has now increased by more than 50% from a year ago.

The energy crisis has also exacerbated disruptions to global supply chains, which are driving prices up and delaying deliveries, including raw materials as well as finished products.

The International Monetary Fund (IMF) recently increased its consumer price index forecast from 2.3% to 3.9% for advanced economies this year, and 5.9% for advanced economies. emerging and developing.

China, the world's biggest commodity exporter and oil importer, has so far kept inflation steady. Still, the economy is vulnerable as producers face high input costs and concerns about energy shortages.

With price pressures growing larger than previously expected, central banks are prioritizing fighting inflation over supporting demand growth.

The US consumer price index surprises with a four-decade high. This sent shockwaves through the markets, raising the odds that the Fed could raise rates up to seven times this year, a faster pace than previously expected.

The Governor of the Bank of England (BoE), Andrew Bailey, pointed to the country's decision to raise interest rates as "pressure from energy prices." European Central Bank (ECB) President Christine Lagarde said officials will "carefully consider" the potential impact of energy prices on the economy as they signal a shift to tightening. The Reserve Bank of India also views oil prices as "a risk".

However, the world economy is no longer so dependent on oil as it was a few decades ago. Many new forms of energy have emerged as an energy backup.

In the US, the boom in the shale oil industry means the economy is less vulnerable to fuel shocks. Although consumers pay more for gasoline, American oil producers make better.

Many other oil-producing countries also have reason to celebrate. In an analysis of oil's winners and losers, Bloomberg Economics estimates Saudi Arabia and Russia could benefit, while smaller oil exporters like the United Arab Emirates also has many advantages. The countries that suffer the most will be South Korea, India and Japan, energy importing countries.

For most consumers and central banks, however, the impact will depend on how quickly prices rise and for how long, especially if economies lose momentum.

Paul Donovan, chief economist at UBS Group AG, says it's important to look at how oil-producing economies use the increased revenues, which can support global growth. "Today, oil-producing countries tend to spend the surplus they get when prices rise," Donovan said.