Publications: Notes at the Margin

The Energy Economic Jigsaw Puzzle (September 26, 2022)


Those attempting to see the oil market’s future today confront a jigsaw puzzle. The pieces are lying on the table, but no one has put them together yet. Had the puzzle been assembled in early 2022, the emerging picture would have been one of slow but steady economic growth combined with very high oil prices for two to four years. However, it was not put together then.


The image that emerges today, regrettably, is one of recession brought on by tightening credit and the threat of financial disruptions caused by developments in European energy markets. If one looks for historical parallels for today’s situation, the most likely one seems to be the global recession instigated by Paul Volcker in 1981. Over the summer of 2022, the central bankers’ focus changed. These individuals, of which the world has fewer than 100, turned their attention to the rising energy prices caused by oil-exporting countries, limited refining capacity, tight labor markets, and the war in Ukraine and took action to prevent inflation from becoming permanent. A recession and falling prices will result.


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