How does the rise in oil impact the economy?

There are three factors that influenced this week the drop of up to almost 10% in the international price of oil: the possible diplomatic solution to the war, the non-embargo of the European Union on Russian crude oil and the request of the United Arab Emirates (UAE) to the Organization of Petroleum Exporting Countries (OPEC) to increase crude oil production. However, on Thursday, March 9, it rose again amid a refusal or a “non-confirmation” of the possibility of increasing production by OPEC, says Omar Azañedo, an economist at the Universidad del Pacífico and CEO of Noncash.

The specialist added that it is important to understand that at times like this, of global political and economic crisis, the global supply chain is affected and oil always tends to rise as a result of speculation and greater uncertainty regarding future scenarios globally.

This volatility, downs and ups are typical of the moment in which we are living. Oil is likely to continue to risegenerating concern in the majority of economic agents worldwide, making fuel, international freight, local transport more expensive and thus increasing concern about higher global inflation, a product of the world economic crisis that we have had for some years and of the pandemic.

The conflict between Ukraine and Russia will continue to impact and cause anxiety in the markets and it is very likely that no sign of resolution of the conflict will put an immediate stop to the perception of a greater risk in the markets.

On the other hand, the markets and agents have clearly seen that economic sanctions do not deter Russian aggression, they are only punitive measures at the expense of world economic growth. High oil prices will also pose a potential threat to company margins and the prospects for consumer spending, here in Peru and in the world, says Azañedo.

For his part, the specialist points out that it is clear that global conditions are volatile, serious and uncertain and that achieving economic objectives at the global, regional and in each country level will require arduous efforts. The reality reflects that markets around the world have reacted strongly due to concerns about how oil prices will risewheat and other basic products, which has fueled the already high world inflation again.