Crude oil hits its highest level in 7 years. If not, how will the war affect daily life?

the Russian invasion of Ukraine has pushed Oil prices higher than it has been in nine years. Brent crude was trading at around $118 a barrel, with analysts predicting it could continue to climb as high as $130. While the Russian invasion isn’t the only reason oil prices are high right now, it seems to have turned things around. High oil prices promise to delay the slow recovery of the global economy from the effects of the Covid-19 pandemic.

Oil futures also rose significantly, indicating traders expected demand to fail to keep up with supply. Even then, the OPEC+ cartel of oil-producing nations decided not to increase production from the increases already planned. A promise of bigger increases from OPEC+ could have helped dampen sharp oil price increases and shield commodity prices around the world from increases.

However, the OPEC+ countries are unlikely to be able to profit from their own coffers for long. If their refusal to increase production only serves to drive prices higher and higher, they face the real threat of a demand slump that could come as a result of any recessions it could trigger in a a number of troubled economies.

The rise in oil prices is bound to have an impact on all the economies of the planet, even if households take a few weeks to feel the effects. Rising energy input costs will inevitably lead to higher prices for essential commodities like food, as well as economically important products and services that could have a big impact on growth and recovery.

Even more than just rising commodity prices, the real devastation that could befall some economies is the delay in returning economic activity to pre-Covid levels. The efforts of governments around the world have been hampered by massive disruptions to supply chains. This means that both exporters and importers have had to make cuts at their respective ends. These cuts have kept oil demand depressed, leading major OPEC+ countries to be wary of increasing their production.

The United States tried to mitigate this vicious circle by releasing some of its own reserves and convincing some allies to do the same. But the amount of oil they put on the market barely met global demand for even a single day.

Russian energy supplies are also increasingly shunned by buyers who fear getting stuck with Russian stocks they may not be able to sell due to sanctions. By sending governments, especially those in Europe, scrambling to fill the gap in Russian supply from other sources, demand, as well as speculation, has increased on the remaining global supply available.

While some upside in oil prices was expected as Russia invaded Ukraine, the market appears to be much more triggered and fearful than usual about this, leaving oil prices at precarious levels. Now is the time for global players to step up and show that while sanctions are not a victory in themselves, they require foresight and mitigation that go both deep and wide.

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