Global Economy and Energy Markets Weekly Commentary – 25th Apr ‘21

Christof Rühl, member of the Advisory Board of Crystol Energy and a Senior Fellow at the Harvard Kennedy School and the Center on Global Energy Policy at Columbia University, discusses the latest global economic developments in this weekly interview to the Gulf Intelligence.

Economies are growing despite supply chain issues and unemployment is low – in some countries such as Germany, it’s proving hard to get any kind of labor services. Most businesses are adjusting to the new normal; the main loser has been the service sector but, generally, we are today in an economically decent starting position.

With respect to the impact of India’s Covid resurgence on global growth prospects, as serious as the situation is, on a per capita basis, the country’s infection rates are not any worse than in some other nations. The reason why most poor countries are suffering disproportionately is due to crowded living conditions and no effective practice of social distancing. Their health systems are also completely overwhelmed. We’re seeing this in India, Brazil and parts of Africa and Southeast Asia.

Christof also discusses whether the danger of the inflation numbers on commodities has been underestimated, highlighting that that we should distinguish where inflation is occurring. There are severe bottlenecks, but they mostly affect finished, manufactured goods such as home appliances where there is also strong demand. The service industry has not been affected so far and nor has the energy sector by and large. Inflation has not been triggered by these bottlenecks – our global market system is typically very successful at alleviating these within a matter of months. Also, in many countries, inflationary numbers are composed of the whole economy and in the US, the service sector is much larger proportionally.

In the US, while economic figures seem to continue to be strong, Christof cautions that we need to be wary that there’s a lot of slack in the national economy – in existing factories, in airline fleets, in cars – any new growth needs to address and absorb that first. The jury’s still out on the pandemic’s impact on long term global growth trends – a case in point is the potential fallout from large economies like India and what it’s going through today.

And amid all these uncertainties, OPEC now faces a credibility challenge on two fronts. One is that depleting inventories in the US and other consuming countries can be replaced with the high flexibility of shale. The other is OPEC’s own spare capacity. Managing supply has become more intricate.

Christof is joined by Jorge Montepeque, President, General Index. Sean Evers, Managing Partner at the Gulf Intelligence, moderates the discussion.

Watch the full discussion:
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Financing the pandemic response and the EU bond issuance“, Christof Rühl, Apr 2021

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