Global energy crunch may inflate prices

BEIJING: Continuing geopolitical tensions like those involving Russia and Ukraine have further tightened global energy supplies and are expected to push commodity prices higher, which will make the ongoing fragile global economic recovery more challenging, analysts said.

Any escalation in hostilities will likely pose a significant risk to commodity exports and supplies and further inflate already elevated prices across energy classes and metals, said JPMorgan in a report.

Russia’s impact on the global energy balance is far-reaching and oil is among the commodities most likely to see an impact should the situation intensify, it said.

With a more than 10 percent market share, Russia is one of the largest global oil producers. While it is the world’s largest producer and exporter of fuel oil, Russia is also an important producer of aluminum, nickel, palladium and copper.

Luo Zuoxian, head of intelligence and research at the Sinopec Economics and Development Research Institute, said the potentially explosive situation in Europe carries massive risks for a world economy that is on its way to recover from the Covid-19 pandemic shocks. It will accelerate inflation, rattle markets and slow the world’s economic recovery by sending already elevated energy prices ever higher.

The rise in international bulk commodity prices has increased firms’ production costs and made the global economic recovery from the Covid-19 more challenging, he said.

China is unlikely to face a shortage of oil and gas, although the rapid domestic economic recovery has been fueling the growth in oil prices in China. However, the rising oil prices will inflate costs for China’s manufacturing sector as the country is highly dependent on oil imports, he said.

He also suggested China should continuously develop its new energy industry while encouraging investment in low-carbon technologies, energy conservation and emissions reduction, to reduce the percentage of fossil fuel in its energy mix.

Oil prices finished higher on Thursday with both the US crude benchmark and Brent exceeding $100 a barrel in intraday trading.