Can oil demand weather the $100-a-barrel punch?
oil trading at $100-a-barrel next year? Because a triple-digit price tag wouldn’t just mean elevated energy prices — it would also turbocharge the dollar. The combination of expensive barrels and a rampaging greenback could make crude a wrecking ball in 2024 that keeps inflation high enough to destroy growth around the world.
The more oil soars, the pricier the dollar is likely to be, creating a pernicious feedback loop.
The longer the cycle continues, the more pain will be felt.
The link between petroleum and the greenback is American inflation. As US retail gasoline and diesel prices climb, they could exacerbate domestic inflationary pressures in other sectors, convincing the Federal Reserve to keep interest rates higher — or even higher — for longer.
The world’s oil central banker, Saudi Energy Minister Prince Abdulaziz bin Salman, and the dollar central banker, Jerome Powell of the Federal Reserve, are working hand-in-hand in some ways.
The result could be a slowdown in oil demand growth in 2024.
Japan is perhaps the best example of the oil-and-currency cocktail. The yen is hovering at its weakest exchange rate against the greenback in nearly 35 years, turning petroleum refined products into a small luxury.
Last month, the Japanese government was forced to extend fossil-fuel subsidies until the end of the year after the nationwide retail gasoline price jumped to a record high of 186.5 yen ($1.24) a liter, surpassing the peak set in 2008.
For now, the countries most affected by the toxic oil and dollar-strength cocktail aren’t the global centers of energy demand growth. Instead of China and Brazil, think about Kenya and Argentina.
