America has not yet forgotten the oil crisis of the 70-80s, which pushed the economy into stagflation and twice into recession, while today, after 50 years, the second stage of the oil and energy crisis may appear. It threatens not only the United States but the whole world.
WTI crude oil futures rose to around $126 a barrel on Wednesday as the U.S. imposed an immediate ban on imports of Russian oil and other energy resources, and Britain announced a gradual withdrawal from Russian oil imports by the end of 2022.
What happens when Europe abandons Russian oil?
Actions and announcements of action by the U.S. and the U.K. may have increased concerns about crude supply. Analysts warn that oil could reach new all-time highs if Europe decides to join its allies. This comes as European countries are highly dependent on Russian energy supplies, which account for nearly 60 percent of oil.
Private oil companies, including BP and Shell, have announced that they are pulling out of doing business with Russia, with Shell immediately halting all purchases of Russian oil and closing its gas stations in the country.
Oil prices have already risen more than 30 percent since Russia's invasion of Ukraine. Fears of supply disruptions and escalating sanctions may be contributing to the increases. The return of Iranian oil to global markets could ease the situation and lead to lower prices, but it is still surrounded by a fair amount of uncertainty.
Federal Reserve in quiet pursuit of inflation
In the foreign exchange market, the US dollar seems to be stabilizing after the previous strong appreciation. The US dollar may be influenced by the Federal Reserve's stance on interest rates and the possible decision to raise them. The decision could come as soon as next week. The Federal Reserve may raise interest rates by 25 basis points, but Fed Chairman Jerome Powell also opened the way for more aggressive moves if high inflation persists. The U.S. inflation report will be released tomorrow, and expectations are that price growth reached its highest level in decades in February at 7.9 percent.
In the 1970s and 1980s, the Fed raised interest rates quickly, chasing inflation. Currently, however, the chase is likely to be much quieter, and real interest rates may still remain negative for a long time.
Daniel Kostecki, Director of the Polish branch of Conotoxia Ltd. (Forex service)
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