In the past two months, have you ever felt that the high oil price seems to be really slowly leaving us? We have seen the price of gasoline falling during the refined oil price adjustment cycle several times in a row. In the past few months, we were still pessimistically discussing whether the oil prices in major cities in my country could enter the 10th era, and today we are going to discuss whether it is possible for oil prices to return to the 7th era.
International oil prices have been declining in recent months. What is the decline? In the past two days, international oil prices have fallen below US$80 per barrel. They have returned to the beginning of the war between Russia and Ukraine. Even in the future, international oil prices may even fall further. This is of course a good thing for ordinary Chinese consumers. Obviously, who is willing to bear the high oil prices.
But many people also have questions, aren’t Russia and Ukraine still fighting wars? Don’t Western countries still impose sanctions on Russia? Under such a state, why did international oil prices not rise but fall? What trend will international oil prices be like in the future? First of all, Russia and Ukraine started fighting in the end of February. It has been more than 7 months now. To be honest, the Western world has almost used all the economic sanctions methods that it can use, which means that things have become bad to a certain extent, and the entire market has completely digested and absorbed the bad news.
Although Russia has recently launched a partial mobilization across the country, and has to recruit 300,000 troops and have to hold a referendum in the four eastern Ukrainian states to enter Russia independently, the entire market has actually learned about this situation and has predictions. Therefore, before new and worse news comes out, the rise of oil prices is useless.
On the other hand, this round of oil prices is obviously closely related to one reason, that is, the United States' interest rate hike . Last year, we said that the United States was too radical in many fiscal policies. After the Biden administration came to power, it printed tens of trillions of U.S. dollars in order to save the economy. This is certainly wrong, but this year the US government also realized that they had encountered shocking inflation , so they immediately started an unlimited interest rate hike.
This year, the Federal Reserve has raised interest rates five times, and has increased 75 basis points each time in the last three times. Moreover, the Federal Reserve has announced that it will raise interest rates several times in 2022. The basic interest rate in the United States is now exceeding 4%. We used to often say that our country is entering an era of low interest rates. When you go to the bank to deposit and manage wealth, it is difficult for you to get more than 3%. Now, as long as you save money, the basic interest rate of the US dollar will get you more than 4%. Therefore, with the continuous interest rate hikes, the United States is really harvesting the whole world.
A large amount of funds poured into the United States. Because of the strong US dollar and the high interest rate of the US dollar, we have seen the US dollar appreciate against almost all mainstream currencies in the world in the past two months. There may be two indicator events this year, one has already appeared, that is, the US dollar has completely surpassed the euro, and the US dollar is really valuable than the euro.
And in the past two days, the ratio of the US dollar to the pound has reached 1 to 1.02, which means that the value of the US dollar may exceed that of the pound this year. Not only the US dollar is appreciating for the mainstream currencies in the world, but the bulk materials used to be priced in the US dollar. Therefore, when the US dollar appreciates, the price of bulk materials is relatively falling, so we see that not only oil prices are falling, but gold prices are also falling.
In the past, we often talked about hiding gold in troubled times, but we see that on the one hand, Russia and Ukraine are fighting wars, and on the other hand, the price of gold price price in US dollars has fallen by at least 15% this year. Moreover, this round of oil prices plummeted, it is not only the US dollar interest rate hike, but also the strong US dollar caused by everyone's unhappiness about the future economy.
Why did the United States raise interest rates today? The main problem is that the inflation in the United States is too serious, but the interest rate hike makes the entire market lack funds, which will have a significant impact on the US economy and even the global economy. The impact of the new crown epidemic on the global economy has been very serious in the past three years. Now more and more political and business celebrities feel the uncertainty of the world economy in the future, and economic activities will further slow down. Therefore, global demand for oil must be reduced, and the supply and demand relationship determines that oil prices will continue to fall.
You think the US economy is already in a precarious state now. Is Japan OK? Is Europe OK? Not good, especially under the influence of the Russian-Ukrainian crisis, the entire Europe is losing blood, which means that the global economy will face great uncertainty in the future. Let’s give an example. In the first half of this year, many people praised the Vietnamese economy. Everyone said that Vietnam has transferred a lot of production lines from my country. Because Vietnam’s labor costs are relatively low, many labor-intensive enterprises, , have been transferred to Vietnam. Vietnam may make a lot of money in the future and have great economic development.
However, in the past two months, according to the official data of Vietnam, they have actually experienced a deficit. A growing manufacturing power has absorbed a large number of production lines with the advantage of low labor prices and obtained a lot of orders from Europe and the United States. However, they actually have an trade deficit . Why? Because their customers' economy is not good, many ordinary people in Europe are worried about energy bills and there is no money to purchase other materials anymore, so the orders Vietnam has received are decreasing, resulting in a trade deficit.
This is a warning to the global economy. Originally, the decline in oil prices was a good thing to promote the economy, but this round of oil decline was precisely due to the sluggish economy and the sluggish demand, which has to alert us.
But on the other hand, is this round of US dollar good for my country's economy? More or less, it is still a little beneficial. The strong US dollar has caused the price of oil to fall, and also caused the RMB exchange rate to fall sharply. Today, 1 US dollar can be converted to 7 yuan, 1 yuan, 7 yuan. Do you think this depreciation speed is a bit too fast?
is very fast, but compared with other mainstream currencies in the world, the RMB still has a certain degree of resilience. What's more important is that today's export trade is very important to us. The RMB is more or less depreciating slightly, and it is still beneficial for our exports.
On the other hand, the decline in oil prices is obviously a good thing for calming inflation in our country. In the past few years, we have been seeing European and American countries facing shocking inflation, with the US CPI index 8%, the UK CPI index 10%, and the inflation in many developed capitalist countries in Germany and France are very serious, so we are very worried that their inflation will affect us.
And over the past few months, many good friends around me have complained that the prices of materials are getting higher and higher. Look at the price of pork and eggs are also rising, and daily necessities such as rice, flour, grain and oil have increased to a little more or less. Even a senior official from the National Development and Reform Commission came out to speak publicly, telling everyone that we may face a situation where all kinds of materials are rising in the future, and we must be prepared.
The world is integrated and is interconnected, especially the US dollar is also the world's general currency. Therefore, when developed countries continue to inflate, this inflation will definitely spread to our country. You think that the continuous rise in raw material prices will eventually be transmitted from industrial enterprises to end consumers. So under this state, the decline in oil prices is definitely a good thing for our economy. Why?
Not only do car owners need to use gasoline, but all aspects of our lives actually need to use the transportation and logistics industry, and the blood of the logistics industry is gasoline, so it is obvious that the decline in international oil prices will help us calm down inflation.
logistics industry costs have dropped and transportation costs have dropped. At least the prices of our terminal products will not rise too outrageously. You should know that in 2021, my country's CPI index has not exceeded 1% throughout the year, and many people are worried that this price will rise very rapidly in 2022, which will also enter a high inflation range. Therefore, the decline in international oil prices is definitely a good thing for us to calm inflation.
Therefore, many people want to ask, will the trend of falling international oil prices continue further? You should know that at the beginning of 2020, when the new crown epidemic just arrived, international oil prices fell to US$30 or US$40 per barrel. Although a number of oil-producing countries complained, at least this price is higher than the mining prices of many countries. International oil prices have really maintained a low level for a long time. So, is it possible that international oil prices will further fall from US$80 per barrel in the future?
Let’s say this. It will be quite difficult for international oil prices to maintain 80 US dollars per barrel in the next six months. Why? This is composed of multiple factors. First of all, for Russia, everyone knows what economic status it is today, so when oil prices continue to fall, the Russian central finance may not be able to hold on.
Not only Russia thinks this way Saudi also thinks this way, so a number of oil-producing countries will definitely use production cuts to boost the decline in the global oil prices. For Saudi Arabia and Russia, they really want to stabilize the global oil price at a high of US$100 per barrel, so that everyone can make money comfortably.
On the other hand, what is the attitude of the United States? Logically speaking, the United States is still the world's largest oil user country today, but the problem is that the United States' mentality has changed a long time ago. After the success of the US shale oil revolution, the United States can also export a large amount of oil to the outside world, so the United States may not be as eager as other countries to see the oil decline.
Therefore, there were news two days ago, did you notice that US President Biden said that in the past year, the United States has released about half of its strategic oil reserves in order to calm global oil prices, of course there is a reason. On the one hand, the United States hopes that international oil prices will drop a little. On the other hand, after the success of the US shale oil revolution, it is no longer very dependent on oil. It can produce a large amount of oil locally, so there is no need to develop so many strategic oil reserves.
But today Biden said that if the international oil price in the future is below $80 per barrel for a long time, the United States may take out a lot of funds to collect and save. Why? On the one hand, this is a business that is stable and profitable for the United States. When it was more than 100 US dollars, it released its strategic oil reserves. Now it is less than 80 US dollars and it will make a lot of money when it buys it back.
On the other hand, the United States' move also has two functions. First, it increases its strategic oil reserves and prepares for the future. On the other hand, it will definitely stabilize international oil prices. It is obvious that the United States is no longer a simple oil importer. It needs to import and export, so it is beneficial to the US economy to maintain oil prices at a certain level.
And the autumn and winter season is coming soon. This winter is a huge test for the whole of Europe, because we all know that Europe is following the United States to sanction Russia today and do not import Russian energy. Then you have to buy from the United States, and you have to buy from the Middle East . For the United States, it really hopes to force Russia to lose this war by banning Russian oil.
But it is obvious that if the global oil market loses Russia's supply, the supply and demand relationship will immediately cause oil prices to soar, especially in the autumn and winter seasons. The demand for energy in the entire European market is really urgent. According to some Russian officials, global oil prices may also soar to $150 or even $200 a barrel by winter.
Of course, we don’t want to see the arrival of such a high oil price era, but it is precisely because of the many uncertainties in the future that there is not that much room for further decline in international oil prices. Perhaps for most Chinese consumers, it is already rare to see gasoline stabilize in the 7th era for a long time.
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