The EU’s ban on Russian oil products is a mere weeks away, winter looms, US diesel prices rise, and the energy crisis is a global affair – with developing economies on the frontlines. Plus, deflation hits China while the US sees a slight breather in inflation, Xi Jinping prepares to visit Saudi Arabia, competition in major metal exchanges, and the neon market heats up while palm oil cools. Oh and then there’s FTX chaos.
Sweeping EU sanctions on Russian oil are scheduled to take effect on December 5. This will impose new strain on already squeezed international energy markets, right as winter weather kicks in. And it’s not just Europe that will feel the consequences. While the continent has so far borne the brunt of the energy crisis – or at least high-profile narrative attention to it – this is a global market, and corresponding global squeeze.
In particular, developing countries are feeling the pinch, and with potentially tumultuous implications: Colder temperatures are on the horizon and Europe has snapped up much of the available fuel. Suppliers have diverted long-term supplies away from Asia to the lucrative spot market, driving up prices as developing economy buyers compete against richer nations for the fuel. Adding to developing countries’ challenge is the strong dollar, which makes energy imports more expensive and increases their debt burdens. To whit: Pakistan will be forced to ration natural gas supply this winter amid shortages and a foreign exchange crisis.
None of this is unexpected. In fact, as early as March, analysts had warned that “Europe and Asia are heading toward fierce energy competition that will disproportionately hit importers in developing and emerging countries in South Asia and South America.” The question, of course, is what it means: Already, recent months have seen growing political instability in developing economies in response to rising prices and supply shortages. What will happen this winter as the brunt of the squeeze kicks in?
Nor is the developed world, including the US, immune to the present energy shortage. Strong demand and reduced global production are pushing up US diesel costs. That’s adding another source of upward inflationary pressure to the US economy because diesel affects the cost of almost every product: goods moved by truck, rail, and ship, for example, or food products planted and harvested using machinery that run on diesel. For the one in five homes that use diesel for heating, energy bills are forecast to rise 27 percent this winter.