Despite the drop in prices of black crude oil by more than 30% from the highest level this year (2022), its dollar-denominated prices have left many unaffected by developing countries And it has developed this decline.
Coinciding with the drop in prices Brent crude From about 128 dollars a barrel, to less than 100 dollars, with a jump in the dollar price of about 15% over the same period.
Fuel prices remain a major factor in rising cost of living in most parts of the world.
The forces of demand for oil, such as China, India and the European Union, have seen a smaller decline oil prices Domestic crude, from the value of the decline in Brent crude oil, according to the newspaper Economic times of India Quoted by Bloomberg (economictimes).
The strength of the dollar reduces the drop in the price of oil
Brent crude oil is used as a benchmark – or reference – to evaluate two-thirds of world oil production, particularly in European and African markets, or markets located in the Atlantic basin, according to information displayed by the specialized energy platform.
For some emerging markets such as Sri LankaRising crude oil prices and the depreciation of the currency caused an almost complete economic collapse.
“The strength of the dollar presents headwinds for oil-consuming countries whose currencies are not pegged to the greenback,” said Giovanni Stanovo, commodities analyst at UBS Group.
“Over the past 12 months, oil prices have gone up a lot in the local currency,” he added.
There are no easy solutions to this dilemma, as rising interest rates to support currencies threaten to slow fragile economies, while developing countries need to monitor dollar reserves.
Eurozone countries are heavily dependent on oil imports and, with no domestic crude oil supplies, the five largest economies of the European Union, Germany, France, Italy, Spain and the Netherlands, depend 90% on foreign imports to manage their refineries.
The dollar price of oil has been a particular problem for European Central Bank officials this year (2022), which has been a testing year for the continent’s economies.
Russia’s moves to reduce gas shipments have put pressure on energy supplies to the continent, pushing inflation rates to record highs of 9.9% in September (2022).
The countries of the European Union depended on Moscow to supply it with about 40% of their energy needs before the outbreak of the war in Ukraine in February of this year (2022).
The suffering of Asian countries
Asian countries are also suffering from the negative effects of the oil price in dollars: in August (2022) the value of imports increased China of oil by 50% compared to the previous year, despite the decrease in overall quantities, due to the restrictions imposed by the state to limit the spread of the Covid-19 virus.
Bank of Korea Governor Ri Chang-yong complained last month that his country’s weak currency was eroding the benefits of falling crude oil prices.
Both Korea and Japan have at times tried to protect consumers from the pain of rising fuel prices by offering subsidies, partly burdening the government.
Strong dollar pressure has prompted India to catch up with trading partners, including Kingdom of Saudi Arabia Russia and the United Arab Emirates, to handle transactions in local currencies.
The Indian rupee depreciated by about 11% against the US dollar during the current year (2022).
The UAE was India’s third largest trading partner during the first five months of the current fiscal year, with a trade volume of $ 3.6 billion, while Saudi Arabia was ranked at the fourth place with 2.3 billion dollars.
“If crude oil prices continue at current levels or rise further, this could lead to an increase in India’s trade deficit and further devaluation of the currency,” said Divya Devesh, Standard Chartered’s currency strategist.
India meets around 83% of its oil demand through imports, according to information monitored by the specialist energy platform.
Emerging economies are bad
Emerging economies are the hardest hit Oil price in dollarsWhen Brent crude is quoted in Ghana’s official currency (the Ghanaian cedi), it records record highs above its trading prices last March (2022).
The Russian war against Ukraine sent oil prices up to record highs of nearly $ 140 a barrel last March, before returning to less than $ 95 at present, with production cuts by OPEC +.
It was an alliance OPEC + It announced – during the last meeting on 5 October (2022) – its agreement to reduce oil production by two million barrels per day, starting next November, until the end of December 2023.
High fuel prices and a shortage of foreign exchange are a toxic combination for some.
Sri Lanka recently closed its only oil refinery because it cannot pay for crude oil, and a bankrupt country over the summer is struggling to finance imports of food and fuel.
“While developed countries have more room to absorb currency shifts, there are certainly emerging markets that will experience balance of payments problems due to rising oil prices,” said Caroline Payne, chief commodity economist at Capital Economics. .
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