Rising Energy Prices — What’s The Outlook?
Amid the chaos of rocketing energy prices, we’re checking out what the future may hold for traders and consumers alike. After that, we’ll give you an overview of what looks to be a very busy week in the markets. Let’s do this!
What’s Going On?
In case you missed it, on 24 February Russia invaded Ukraine. Many countries began putting together a package of severe economic sanctions designed to cripple the Russian economy and force a resolution to the conflict.
Fast-forward two weeks and those sanctions are still being placed on the Russian Federation. One of the biggest announcements last week was the decision of the US to immediately ban Russian oil imports. The EU and UK also announced that they plan to phase out imports of Russian oil and natural gas.
Russia is the world’s third-largest oil-producing nation, so these moves are no small thing, particularly for Europe. Russian oil makes up roughly 10 per cent of the global demand. That’s a mighty chunk in the grand scheme of things.
How Are The Energy Markets Looking?
In a word — bad.
In 2022, WTI price has risen from 75.21 USD per barrel to reach a high of 123.75 last week — a 48.49% rise in just 3 months. The price has since dropped down to 109.09 USD, but that still amounts to a 42% rise since the markets opened in January.
Oil (WTI), 2022
Source: Business Insider
On banning Russian oil imports, US President Biden warned that Americans will see rising prices, saying, “Defending freedom is going to cost.”
Petrol and diesel prices are based on the cost of crude oil, which jumped in response to the invasion and Western sanctions. As a result, consumers are facing much higher costs at the pumps, already reaching the point at which they’re better off filling up the car in the morning because the price will be higher by the time they drive home.
Such an economic sacrifice is impacting prices and squeezing consumers around the world.
What’s Next?
TBH this is simple market economics. If global supply declines, the global price will increase, so until that 10% gap can be filled, prices are going to continue to be shaky. Current fuel prices have already surpassed previous records set in the summer of 2008 (not accounting for inflation).
But it’s not just the war that’s having an impact on prices. In the US, inflation has been flying for a while. The Consumer Price Index for February, released last week, is at its highest point since 1982 (7.9%).
The Fed will be under pressure to begin raising interest rates at its meeting on Wednesday. Higher interest rates could slow the economy. Which, incidentally, was starting to turn a corner following relative recoveries from the pandemic and supply chain crises. Typical.
Another strain on the economy will be the likely drop in consumer spending. With the outlay on fuel now being so high, consumers could cease buying luxuries and other goods to help cover the cost. This could have a huge impact on many industries.
The political-economic situation is unravelling on an almost daily basis. Sit tight and keep reading!
Are you feeling the energy pinch?
Have you seen your energy bills rise? have you adjusted your trading strategy in light of recent events? Let us know by tweeting us at @_Contentworks!
Top trading events week commencing 14.03.22
There’s a fair bit going on this week, here’s when and where you need to tune in.
Monday
● No specific events are planned.
Tuesday
● GBP — Employment Change (DEC); Unemployment Rate (JAN)
Wednesday
● CAD — Core Inflation Rate YoY (FEB); Inflation Rate YoY (FEB)
● USD — Retail Sales MoM (FEB); FOMC Economic Projections; Fed Interest Rate Decision; Fed Press Conference
● NZD — GDP Growth Rate YoY (Q4)
Thursday
● AUD — Employment Change (FEB); Unemployment Rate (FEB)
● EUR — Core Inflation Rate YoY Final (FEB)
● GBP — BoE Interest Rate Decision
Friday
● JPY — Inflation Rate YoY (FEB); BoJ Interest Rate Decision
Here at Contentworks we closely follow market movements and prep content that we think your traders would love to read. Let’s get you started right here.
The Contentworks team
