The global economic discussions are currently focused on the rise in raw material prices, particularly oil, which has seen a 10% increase in the last two months. This surge is due to a variety of factors, including short-term chaos and long-term uncertainties.
One major factor contributing to the current situation is OPEC+’s decision to maintain crude oil production cuts until next June. Additionally, Russia has faced drone attacks on its refining infrastructure, China has reduced its oil imports in the first quarter, and the unexpected resilience of the US economy has also played a role. Tensions in the Middle East, particularly between Israel and Iran, have added to the uncertainty in the oil market.
The oil market is already under strain due to issues in the Strait of Bab el-Mandeb and now concerns are rising about the stability of the Strait of Hormuz. Both straits are crucial routes for global oil transportation, so any disruption can have a significant impact on global oil prices. The short-term chaos in the market is further compounded by long-term uncertainties as global efforts to reduce dependence on fossil fuels clash with slow progress in scaling up renewable energy capacities.
As a result, we can expect high price volatility in the near future. Analysts predict that oil prices will range widely by the end of the year due to fluctuating market conditions. Despite lower demand expectations and decreased investments in the sector due to uncertainty about future investments and energy policies, prices are expected to remain relatively high due to these factors. Overall, this presents a challenging future outlook for both investors and consumers alike as they navigate an uncertain energy landscape.