Oil prices have broken away from the $10 range that we saw quite predominately throughout the month of April and most of March. This was expected. The war in Ukraine is getting more heated with additional measures and sanctions imposed on Russia, we’re heading closer to the holiday and driving season in the Western world, and people are questioning how sustainable China’s Covid policy can be, given its emphasis on supporting economic growth. So, there’s not much to put downward pressure on prices today, but we should not rule out a reversal of that if we get gloomier macroeconomic data in the coming months.
Dr Nakhle also comments on the EU fractures which have clearly started to emerge on Russia energy sanctions and are expected to persist. We have a very diverse group of countries, not only in terms of their dependance on Russian oil and gas, but also in their historical relationship with Russia. We also need to think about what’s already happening in these economies. The refugee problem is perhaps the biggest humanitarian crisis in Europe since World War II and that by itself is having a major impact. One can understand where Italy and Hungary are coming from in a way.
She further comments on whether central bankers across the world are any closer to tackling inflation. The Fed’s policy of trying to balance between taming inflation and not slowing down the economy, has already been factored in. OECD central banks still seem to be hoping that the inflationary pressure will start to ease as we approach the end of this year. We may see demand correct on the back of these high commodity prices as they take a larger toll on consumption and household incomes. We are also now seeing a protectionist movement growing on food exports, for instance in some Asian countries. So, not only are we seeing a reversal vis a vis climate change or investment in oil and gas, but there’s also a major reversal in the globalisation trend that has been around for decades. We will have to see how that impacts global trade and global economic growth.
Dr Nakhle is joined by Rafiq Latta, Senior Correspondent, Energy Intelligence, and Ali Al Riyami, Consultant and Former Director General of Marketing, Ministry of Energy and Minerals, Oman. Sean Evers from Gulf Intelligence moderates the discussion.
Watch the full discussion:
“Sanctions and the Economic Consequences of Higher Oil Prices“, Christof Rühl, Apr 2022
“Energy Markets and the Design of Sanctions on Russia“, Christof Rühl, Mar 2022
“EU Sanctions on Russian Oil“, Dr Carole Nakhle, May 2022
“The West and Russian Hydrocarbons: Towards an end to this dependency?“, Dr Carole Nakhle, May 2022
“The outlook for Russian gas in Europe“, Dr Carole Nakhle, Apr 2022