The price of oil has more than doubled in real terms (relative to the US CPI) in less than three years since it bottomed out in early 2016.. Like rising interest rates, this move (partly supply driven) can cross the threshold from being (mostly) caused by strong global growth to slowing it.
Income redistribution generally causes those in pain to react faster than those with a gain. This means consumers are likely to cut back faster than oil producers will ramp up their spending (especially in Russia compared with ten years ago). Also income is diverted from productive parts of the world economy to extraction of below-ground resources – and extraction mostly in specialised regions, the Middle East and the former Soviet Union. True, US oil output boomed until 2014, and is now two thirds of its usage, while China too produces one third of its oil. But continental western Europe (excluding Norway) produces very little, and likewise Japan, Korea, India and much of Asean. The world’s economic locomotives are losing fuel.
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