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New Menace Faced by OPEC by the Central Bankers

OPEC has dismissed US President Joe Biden’s appeals to pump more oil, but the group may find it more difficult to ignore the acts of under-fire central bankers. The caretakers of the world’s monetary system and inflation watchdogs are responsible for growing living costs on energy producers. They say that rising energy prices are producing inflationary pressures that are jeopardizing global recovery. On Nov. 4, the OPEC+ alliance with Russia fanned the flames by refusing to comply with US requests to increase output by 400,000 b/d.

Assessed by S&P Global Platts Brent crude, used to price two-thirds of the world’s fuel, has risen 63 percent year to far, peaking at $86 per barrel in late October. The increase has occurred while gasoline prices in the United States, the world’s largest user, have remained above $3 per gallon, as well as a spike in gas costs across Europe, which has been dubbed an energy crisis. As a result, the gas markets are even frothier.

According to S&P Global Platts Analytics, the Platts-assessed day-ahead TTF contract in Europe set fresh record highs in early October and is still approximately five times the three-year average. Moreover, on Oct. 6, the JKM, the global benchmark for spot LNG, reached a new all-time high of $56.33/MMBtu and has hovered around $35/MMBtu since then. Without a doubt, rising energy and commodity costs have contributed to global inflation.

This summer, inflation surpassed the European Central Bank’s 2 percent target, with higher energy costs accounting for half of the increase. Consumer price rise in the United States is far above 5%, a figure that neither the Biden administration nor the Federal Reserve can ignore permanently. OPEC is equally concerned about the dangers of supply-side inflation.

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