In conjunction with the war in Ukraine we have seen oil prices continue to soar. The US benchmark for oil (West Texas Intermediate or “WTI”) has increased more than 85% over the past 12 months.
There are several reasons behind this rise. Supply has been constrained by pandemic-induced production delays as well as political and social pressures to curtail oil production and exploration. Additionally, the global demand for oil recovered faster than many expected. And most recently, the Russian invasion of Ukraine has accelerated the price climb with WTI breaching the $100 per barrel level and is trading near $130 as we write this Sunday evening.
Prior to the Ukraine invasion, inflation and rising interest rates dominated the headlines. Now we need to consider how the price of oil impacts economic growth.
There are a limited number of times when oil prices increased by more than 85% during a year. However, this has typically occurred near the time of a recession.
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