What’s Going On Here?It may not be on the run from a remorseless intelligent killing machine – at least, not yet – but resurgent oil prices have become just the latest trouble plaguing China. What Does This Mean?After dropping below zero thirteen months back, the price of oil has rapidly recovered: it hit its highest level since 2018 on Tuesday following optimistic forecasts from OPEC+, the influential group of major oil-producing countries and their allies.
OPEC+ reckons the global supply glut caused by the pandemic is nearly gone, and that inventories of stored oil will fall sharply in the second half of the year as restrictions ease and the global economy rebounds. The alliance accordingly greenlit a planned increase in daily oil production starting next month – while downplaying concerns that a potential Iranian return to international oil markets would materially alter supply-and-demand dynamics. Why Should I Care?The bigger picture: Red alert.
It’s not just oil: higher prices for all sorts of commodities are proving to be a headache for communo-capitalist China and its resource-hungry growth ambitions. As if that wasn’t bad enough, a recent rally in the international value of the country’s currency, the yuan, has made its exports more expensive and therefore less attractive overseas. China’s responded by resorting to measures it last used during the global financial crisis, telling local banks they need to hold more foreign currencies in reserve. Making it harder to buy the yuan using such currencies should help stem its rise.
Zooming out: Optimism is contagious.
It’s not just OPEC+: on Tuesday, the influential OECD raised its forecast for global economic growth this year from 4.2% to 5.8%. Subsequent growth of 4.4% in 2022 would bring most of the world’s economies back up to pre-pandemic levels, with the US and a freshly philoprogenitive China expected to be setting new records by the time 2023 rolls around (tweet this). | 