What’s Going On Here?Oil’s price topped $110 for the first time since 2014 on Wednesday, as the world refuses to do business with a belligerent troublemaker. What Does This Mean?Oil’s been getting more and more expensive in the last few months, as recovering economies clamor for the limited supply that’s out there. And now that Russia’s invaded Ukraine, those supply issues are looking even more desperate. See, big buyers of Russian oil – think refineries, banks, and shipowners – are now shunning the country altogether, even though it’s the third-biggest producer in the world. In fact, according to one energy consultancy, Russia is struggling to find buyers for around 70% of all its output, even at a discount. And unfortunately, we’re all going to feel it: the price of Brent crude – a key oil benchmark – hit an eight-year high on Wednesday. Why Should I Care?Zooming in: Thanks for coming, IEA.
At least the International Energy Agency is trying to keep everyone calm amid this shortfall in supply: the intergovernmental organization announced this week that it’ll release 60 million barrels of oil from its global stockpiles, in what will be the first time in 11 years its various members have simultaneously released oil reserves. That’s cute: the world goes through 60 million barrels in 14 hours flat.
The bigger picture: Ripple effects.
This oil hike hasn’t filtered through to the inflation rate yet, but recent data doesn’t paint a pretty picture of what happens when it does. Europe’s energy prices were already 31% higher last month than they were in February 2021, which helped push inflation in the region to a record high of 5.8%. A rising oil price, then, means Europeans will face higher bills in the next few months, which will leave them with even less cash to spend. That could be why one European Central Bank economist thinks that the Russian invasion could stunt the region’s economic growth by as much as 0.4% this year. | 