Best in Energy – 23 March 2022

Fed’s narrow path to a soft-landing*

Russia sanctions risk diesel shortage

U.S. imports of petroleum from Russia

Russia’s oil exports and global economy

China’s plan for hydrogen development

White House options to cut fuel prices

Russia cuts pipeline oil flows after storm

U.K. inflation rate accelerates to 6.2%

* The Fed’s aggressive rate rises in 1994 helped create a government debt funding crisis in Mexico forcing a devaluation of the peso at the end of the year (the “tequila crisis”). The U.S. central bank was caught unaware (see Fed minutes from an emergency conference call held on Dec. 30, 1994). Rapid interest rate rises in the United States tend to induce extreme stress in the more peripheral and obscure parts of the international system. In 1994, it was the Mexican government’s increasingly heavy reliance on funding its operations with short-duration dollar-linked bills known as “tesobonos” that had to be constantly rolled forward. The causes of the peso crisis was my first semi-serious piece of research when I had to write a 15,000-word thesis on it for my university finals in 1996.

BRENT spot prices and calendar spreads are ratcheting higher again as traders anticipate a prolonged conflict in Ukraine and therefore a prolonged disruption of Russia’s petroleum exports, coupled with the lack of spare capacity in the global oil supply system, leaving it increasingly vulnerable to any more shocks:

U.S. GASOLINE prices have started to converge with Brent after the supply chain was shocked by Russia’s invasion of Ukraine. But retail prices are still rising at one of the fastest rates for 30 years, increasing by around 20% over the last four weeks, which is in the 99th percentile for all four-week periods since 1993:

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Published by

John Kemp

Energy analyst, public policy specialist, amateur historian