Hugues Chevalier, Economist
Oil price – a shock?
Oil prices have risen sharply since the beginning of the second quarter of this year, rising from 65 dollars a barrel to nearly 80, an increase of more than 20%. Since the beginning of the rebound in crude prices in early 2016, when the barrel was around 30 dollars, prices rose about 170%. Until the beginning of the year, the gradual rise in the price of crude had been cushioned by the expansive monetary policies of central banks. But since the beginning of the year this is no longer the case. This rise in prices has several origins, both on the demand side and the production side. Added to this is a sharp rise in geopolitical risks (Iran, Libya, etc.) that keep the pressure on the prices. OPEC, which met on June 22, followed by its Russian ally, has announced a slight increase in production to stabilize prices. But in the current environment, prices have not stabilised.
The sharp rise in oil prices in recent months (and their decline in recent days) has caused a mini-oil shock and a slowdown in global activity. However, despite the sharp rebound in prices, the consequences for the global economy are not similar to those of previous oil shocks for several reasons. First, energy productivity, or energy efficiency, is still growing rapidly. This means that “entrants” in the form of oil weigh relatively less in the total costs of the economy. Another factor is the declining share of oil in primary energy and the development of gas and renewable energy. The rise in oil prices remains, admittedly, a penalizing factor for activity, but less than previously, as evidenced by its impact on consumer prices in the euro zone, whose rate of increase has not exceeded 2% in recent months.