Cold Shoulder


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What’s going on?

The price of oil hit a 14-year high on Monday, after the US threatened to cut all ties with the world’s third-biggest oil producer.

What does this mean?

The oil price already hit an eight-year high last week, when global refineries and banks refused to buy the slippery elixir from a warmonger like Russia. And the supply squeeze now looks set to get worse: the West is ramping up sanctions in a bid to put more pressure on Russia’s flailing economy and bring the conflict to an end. The US government, for one, said this weekend that it’s thinking about outright banning Russian oil imports. And since that would leave an even smaller supply of oil up for grabs, its announcement drove up the price of Brent crude – a key international oil benchmark – to an eye-watering $139 a barrel on Monday.

Why should I care?

The bigger picture: Here comes stagflation.

The International Monetary Fund warned over the weekend that the effects of the war – including higher food and energy prices – could cripple the global economy going forward. It’s not the only one: JPMorgan’s economists just cut their outlook for global economic growth this year by 1% (tweet this), while some analysts have expressed concern that America’s ban might tip us into “stagflation” – the dreaded mixture of slowing growth and rising inflation.

Zooming out: China’s nothing if not contrarian.

China has mostly kept out of the fray so far, and the West’s sanctions aren’t exactly a pressing concern: Russian and Ukrainian trade and investment only make up a small proportion of its economy. That might be why the country is still confident it can grow its economy by 5.5% this year. As for how, economists reckon it’ll invest heavily in its infrastructure, as well as cut interest rates to encourage borrowing and spending – even as other major economies raise theirs.

Originally Posted March 7, 2022 – Cold Shoulder

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