2023-09-18 06:41:54
The interests of both the Kingdom of Saudi Arabia and Russia were intertwined in the oil file, as they deliberately reduced their oil production, raising the price of a barrel of oil to high levels that now constitute a real threat to global economic growth. Of course, the intersection of interests between Russia on the one hand and the Kingdom of Saudi Arabia on the other does not mean that the political and economic vision between the two countries is identical. Russia is struggling to be able to continue in light of deadly financial and military exhaustion, as a result of the Russian-Ukrainian war, while the Kingdom of Saudi Arabia has shown to the whole world, and specifically to the administration of US President Joe Biden, that the Kingdom is a difficult number in the regional and even international equation.
Regardless of the geopolitical dimension of the rise in global oil prices, this rise has begun to weigh on the growth of the global economy in general and the American economy in particular. Oil is a strategic commodity that is used in the manufacturing, packaging, and transportation of at least 95% of the goods, goods, and services that surround us. Therefore, the rise in global oil prices will inevitably raise the cost for the companies that will transfer it to the final consumer, which means a rise in prices in general – that is, inflation.
The problem imposed by the equation of reducing oil production by both the Kingdom of Saudi Arabia and Russia struck at the heart of the actions of the US Federal Reserve, which raised interest rates to high levels (5.25%) to combat inflation. Therefore, reducing oil production will lead to higher prices and inflation, which will reduce the ability of the Federal Reserve to raise interest rates for fear of accelerating the economic recession.
In practice, the global oil production map indicates that there are three main oil producers: the United States of America with 11.6 million barrels per day, Russia with 10.5 million barrels per day, and the Kingdom of Saudi Arabia with 10.2 million barrels per day (2023 figures). Of course, there are other countries, such as Canada, Iraq, China, the United Arab Emirates, Brazil, Kuwait, and even Iran, which produce quantities that are important to the market and play a role in balancing supply and demand. Hence, questions arise regarding the American strategy towards Iran, which has become an important player (ranked tenth globally) in this highly important game.
However, the biggest problem for the United States of America remains diesel fuel, which is widely used in industry and transportation, and of which refineries in the world are unable to produce enough, which means depriving the economy of the basic fuel for industry and transportation at the same time. This deficit, which comes primarily from a lack of production, but also from competition within refineries between types of fuels, has raised diesel prices in the United States of America to high levels ($140), and the same is true in Europe, which witnessed a rise in prices amounting to sixty percent during the summer period. . The situation was made worse by the decision of Saudi Arabia and Russia to ban the production of diesel-rich crude oil, with expectations that this ban and reduction in production will extend beyond the end of this year. In addition, a number of refineries in the world stopped working, as a result of the Corona pandemic or for profit reasons, which reduced diesel production. This prompted countries, led by the United States of America, to tap into their reserves to meet economic demand, especially during the summer. However, if the situation continues as it is, it will undoubtedly weaken the possibilities of overcoming the economic recession in the United States of America, which will have political repercussions at home in America, as a result of the proximity of the presidential elections. Competition in refineries between diesel and other fuels will raise the prices of gasoline (for example) and diesel used in transportation operations, that is, an increase in the prices of goods and commodities, especially since there are expectations for consumption to rise to one hundred thousand barrels, according to the International Energy Agency.
This reality will be reflected in the Lebanese arena, as fuel prices continue to rise as a result of rising global oil prices, or as a result of competition with other fuels in refineries. From this standpoint, it is expected that we will witness a continued rise in fuel prices in Lebanon, in light of stifling economic pressure that will undermine all the efforts of the caretaker government to return public sector employees to their workplaces, and will place the 2024 budget in an additional deficit. In addition, merchants will undoubtedly raise the prices of goods and merchandise under the pretext of the high cost of transportation, which will lead to an increase in inflation in Lebanon, especially in the three basic sectors, namely fuel, food, and medicine.
From this standpoint, we believe that the caretaker government must develop plans to confront this bitter reality for which the citizen will pay, through several steps, for example (but not limited to):
– Buying futures contracts on oil in light of expectations that global prices will continue to rise.
– Taking incentive measures to reduce fuel consumption in Lebanon, to push individual initiative to use renewable energies in all sectors in which they can be used.
– Stimulating the use of electric cars and others.
– Carrying out the necessary economic reforms to stimulate local industry.
Reducing dependence on imports by developing a plan similar to the one adopted by South Korea shortly following its exit from the civil war.
However, in light of the blockage of the political horizon, it is unlikely that the government (which is a caretaker government) will take any measures, given the sharp division taking place.
1695020818
#world #heading #fuel #crisis.. #Diesel #economic #machine #rise #prices #spread #Lebanese #economy.. #solutions #horizon
