Two men follow the performance of the Kuwait Stock Exchange, in an archive image.Noufal Ibrahim (efe)
Everything seems ready for the two largest issuing institutions in the world, the European Central Bank and the Federal Reserve, to begin lowering interest rates in June after several delays with respect to the initial calendar. However, someone is threatening to stand in their way: the Organization of the Petroleum Exporting Countries (OPEC), the sectoral cartel, which with its repeated artificial production cuts is raising the price of crude oil well above where it should be based on market fundamentals. offer and demand. A factor to which another has been added in recent times: the Ukrainian drone attacks on Russian oil infrastructure, a country that – although sanctioned by the West – continues to be key in the global oil balance.
Oil is a particularly tricky element in the always difficult Rubik's cube of general price indices (CPI), which set the tuning fork for central banks when it comes to raising or lowering the price of money. It is so both because it is a key energy input, with an impact on the entire price chain, and because of the absolute inability to modify its behavior in the West: with the only exceptions of the United States, Canada and Norway, the largest crude oil exporters in the world. world are in the Middle East and Latin America, and grouped around OPEC+, the expanded version of the cartel. Although expensive crude oil is being felt in all consuming countries—the United States and China included—the blow is particularly notable in the eurozone, historically much more sensitive to what is happening in the global crude oil bazaar.
A woman in front of the flame of an oil well in Ughelli (Nigeria). AFOLABI SOTUNDE (Reuters)
Despite the correction in recent days, which has been contributed to by Washington's request to kyiv to stop bombing Russian oil facilities in order to prevent the price from further spiraling out of control (and complicating matters for the Fed), the brent accumulates an increase of almost 20% in just over three months. Although still far from last year's maximum, at the end of September - when crude oil reached almost 100 dollars - the rise represents a reversal of the previous trend, in which all energy items - crude oil included - fell. This is no longer the case: although gas and, above all, electricity, continue to put downward pressure on the CPI, fuels have gained a place on the list of concerns of the ECB and the Fed itself. At a key moment: when they face the called the last mile in its fight against inflation.
Any increase in the price of oil cascades to the prices of practically all consumer goods. The most affected are, logically, motorists and users of public transportation with unregulated prices, such as airplanes or long-distance buses. But not only: the rise in gasoline and diesel prices also ends up reaching the final price of practically all shelves—especially food—just when the shopping basket began to give up.
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Although oil is by no means the only variable that interacts, the landing of prices has stalled in the US in the last two months, with a smaller decline than the market anticipated. Reviving, in turn, two voices: that of the moderate hawks — who point to a stickier inflation than expected — and that of the radical hawks — who continue to draw parallels with the episode of the seventies, when the previous ones resurfaced strongly when central banks began to loosen the noose on rates.
Jorge León, vice president of the specialized consulting firm Rystad Energy after several years in the OPEC engine room, believes, however, that the blood will not reach the river. His forecast calls for Brent at “still high levels” in the second half of 2024, “but without going above $90 per barrel on a sustained basis.”
In this scenario, León believes that the impact on inflation will be “limited”: despite the recent increases, he says, the price of oil is still not “particularly high, especially if we look at where we come from” and, in any case, “not enough to force them to change their plan of action” in the next rate decisions. That is to say, the June drop is still within reach and, with it, relief in the pockets of the mortgaged. “For crude oil to have a very significant effect on inflation and rate decisions, the barrel would have to go above $100 again.” Something that practically no one contemplates. At least for now.
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