OPEC and the world’s most powerful central banks are on a collision course. Higher crude prices could push the custodians of the global financial system into tightening monetary policy quicker than expected to protect their economies from unchecked inflation. But, a kneejerk reaction could sow the seeds of economic slowdown, oil demand destruction and another price crash.
Take the problem facing Mark Carney, governor of the Bank of England. Lower-than-expected inflation figures released this week give the impression fears over the impact of higher energy costs in the world’s sixth-largest economy have been overblown. Since 2016, when oil prices dipped below $30/b, gasoline prices have jumped by almost 30% to an average around 127 pence/liter at the pumps.
