FT News Briefing Russia’s war on Ukraine boosts China’s financial ambitions
Mar 8, 2022
Global oil and gas prices are in flux amid geopolitical tensions, with the U.S. striving to ban Russian crude while facing opposition from Germany. This has sparked fears of a broader financial fallout, resulting in significant market drops. Interestingly, sanctions on Russia could inadvertently boost China's efforts to internationalize the renminbi, especially through alternative payment systems. Amidst this crisis, some Russian industry executives express surprising optimism about high oil prices, reflecting the complex interplay of global finance and geopolitical dynamics.
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Oil Price Volatility
- A potential ban on Russian crude sent oil prices soaring to $139 a barrel before falling back to $120.
- Investors reacted by selling off stocks, resulting in the S&P 500 dropping nearly 3%.
Economic Impact of High Oil Prices
- Elevated oil prices could significantly impact the global economy, potentially reducing global GDP by 1-2%.
- This could trigger a severe recession and a lost decade for oil demand.
Oil Supply and Demand Imbalance
- Years of underinvestment in oil production, coupled with surging demand, have created a supply shortage.
- Oil producers are hesitant to increase investment despite high prices due to pressure from Wall Street to maintain high profits and dividends.