ResponseSpent last night thinking about the cuts and the US response. Biden will want to
release more from the SPR because of the election cycle and the Fed will continue
their hard line rehtoric to combat inflation.
My thinking is the world is going to have to accept oil @ 90 as an average price
for quite some time. That price reflects the structural supply deficit that is not going
to go away any time soon and is economically feasible for the world to cope with.
That price will eventually come down as more supply comes on. Central banks
don't like it but as the oil price stabilizes, the world will adjust and inflationary pressures will adjust as well and stall out. Fighting with Opec by raising rates is a losers gambit and will in the end do more harm than good. Its a choice between the lesser of two evils. Massive economic and financial dislocation or accepting and adjusting to a stable $90 oil price for a period of time until supply can catch up.
The other thing is $100 oil or higher is too damaging and not sustainable anyway.
Opec is smart enough to know that and would avoid that situation. Stable oil
prices can be handled at $90 IMO. What I fear is that can the world handle the consequences of rising int rates. How can countries which are trillions in debt and
economies that need interest rates at a level to encourage growth and employment
survive another recession cycle? It makes no sense and could be catastrophic.