Dear readers, welcome to another edition of the Global Economic Outlook (G.E.O) - our weekly newsletter providing insights on the local and global economy. Today, we will be looking at how Oil has continued to maintain its relevance.
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Oil is Still ‘Gold’
When the oil prices crashed in 2020 at the height of the coronavirus pandemic, it looked very much that the days of high oil prices were well and truly gone. In fact, at some point oil futures prices were in the negative as producers were seeking storage space and supply was well above demand. Fast forward to 2022 and oil prices are above $100 per barrel and have been that way for several weeks. Many of the oil producing countries and companies alike are enjoying their best moment for years.
The recovery from the coronavirus pandemic which spurred the demand for oil was the first catalyst for the rise in prices although the strategic management of production quota by the Organization of Petroleum Exporting Countries (OPEC) has also proved effective. Both factors pushed prices up but even experts thought that it would only go above the $100 mark towards the end of the year, but then the Russia-Ukraine crisis happened.
Russia is the sixth largest producer of oil in the world and although not a member of OPEC, has worked in collaboration with the cartel to coordinate prices in the global market for years. Russia has been hit with many sanctions for their invasion of Ukraine and many countries are boycotting their oil. OPEC has also chosen not to drastically increase the production quota of countries and despite the fact that the production of shale oil has been ramped up in America, there is still not enough to pull prices down below the $100 mark. The inflation in many countries can also be traced to rising energy costs.
There has been a lot of talk about clean energy in the past decade that one could feel that Oil has no place in future despite its usefulness across industries and sectors. Events in the past few months have shown that this cannot be further from the truth. Oil is not only critical now but will also be an important resource in the future. The transition to renewable energy will be gradual and not happen overnight.
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Inflation has become a serious threat to purchasing power all over the world. In this video, we look at five practical ways to stay ahead.
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