Jakarta, CNBC Indonesia – World crude oil prices fell sharply this week, approaching again the 8-month low reached last September. The world, which is threatened with a recession next year, is the main depressor of crude oil prices.
When a recession occurs, the demand for crude oil will naturally decrease and oil prices will also decrease.
West Texas Intermediate (WTI) crude fell 10% this week to $80.08 a barrel, according to Refintiv data. Meanwhile, Brent crude dropped 8.7% to $87.62 a barrel.
A recession is certain to happen, even several central banks have declared.
The central bank of England (Bank of England / BoE) has become the boldest in declaring that it will experience a recession. In fact, the longest recession in history.
“Economic growth is expected to continue declining during 2023 and continue into the first half of 2024 as high energy prices and tightening financial conditions weigh on household spending,” the BoE said.
The unemployment rate is expected to double to 6.5% over the next two years as the economy collapses.
This was affirmed on Thursday (3/11/2022) by raising interest rates by 75 basis points to 3%. The increase was the largest in 33 years.
The same thing was also expressed by the Canadian central bank (Bank of Canada / BoC). At the end of last October, the BoC declared that its economy will stagnate for the next three quarters. However, it will still raise interest rates.
“The period of monetary tightening is almost over. We are close, but not there yet,” BoC Governor Tiff Macklem said at a news conference as reported by ReutersWednesday (26/10/2022).
Macklem said how much high interest rates will depend on the impact given, how much monetary policy is able to dampen requesthow is the problem supply resolved and inflation and inflation expectations respond to policy.
Even the central bank of the United States (US) or known as the Federal Reserve (The Fed) admits that it is difficult to prevent the economy from a recession or soft landing.
“Is the possibility of a soft landing diminishing? Yes. Is it still possible? Sure,” said Fed Chairman Powell, raising interest rates 75 basis points to 3.75% – 4% on Thursday (3/11/ 2022).
Powell added that preventing the US economy from going into recession in 2023 is very hard work, because interest rates still need to be high to reduce inflation.
CNBC INDONESIA RESEARCH TEAM
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