Oil prices near Q2 2008’s record level

Economic growth


Brent Mar12.pngFinally, and far too late, policy makers are waking up to the damage that today’s high oil prices are doing to the global economy. Q1’s oil price averaged $119/bbl, just 7% below Q2 2008’s record $127/bbl ($2012).

Thus Saudi Oil Minister, Ali Naimi, last week told the Financial Times:

“High international oil prices are bad news. Bad for Europe, bad for the US, bad for emerging economies and bad for the world’s poorest nations. A period of prolonged high prices is bad for all oil producing nations, including Saudi Arabia, and they are bad news for the energy industry.

“The bottom line is that Saudi Arabia would like to see a lower price…There is no lack of supply. There is no demand which cannot be met. Total commercial stocks for OECD nations are within target, and enough to handle almost any eventuality”.The chart shows that recession (pink column) has followed every time oil prices in $2012 (red line) have moved above $50/bbl (green dash):

• Today’s oil price is now 5.5% of global GDP
• It was usually 1% – 3% during the 1982-2007 supercycle
• Consumers cannot avoid higher gasoline/diesel and heating bills
• So they have less money to spend on more discretionary items

Recession has been delayed this time by money-printing from the major central banks – the USA has lent $1.6tn via QE1, QE2 and ‘Operation Twist’: China has added $1.6tn in bank lending: and the European Central Bank recently added €1tn ($1.4tn) via its LTRO.

Policymakers also tried to postpone a downturn in the 2000s with the subprime credit boom. Previously in the 1970s they had allowed inflation to reach >10%. But both times, reality intervened and recession followed.

The blog would like to believe that ‘this time will be different’. But as the great Spanish philosopher George Santayana wisely noted in 1905, ‘those who cannot remember the past are condemned to repeat it“.

ICIS pricing comments and price changes since the IeC Downturn Monitor launch on 29 April are below:

PTA China (red), down 13%. “Players are unsure of the downstream demand outlook in April”
Benzene NWE (green), down 11%. “Prices largely followed upstream crude movements this week amid a lack of any real activity.”
HDPE USA export (purple), down 7%. “Traders continued to purchase very little material, saying US prices are too high to work in other regions”
Naphtha Europe (brown dash), down 4%. “Demand picking up from the gasoline sector as blending margins become more favourable”
Brent crude oil (blue dash), down 1%
S&P 500 Index (pink dot), up 3%


China's polyethylene demand growth remains slow


There are increasing signs that China’s economic growth is slowing. Local ...

Learn more

US PE exports down 39% despite shale gas


Globalisation had a golden age between 1982-2007. Trade barriers fell almost eve...

Learn more
More posts
‘Watch out below!’ as supply chain chaos comes to an end

“What goes up, comes down” is usually a good motto when prices start to reach for the sk...

Industry now needs to step up, if Net Zero is to be achieved

Net Zero is clearly the key issue of our time. With COP26 about to start, 3 key elements need to com...

The Fed’s stock market bubble is at risk as China bursts its real estate bubble

The US stock market bubble just keeps rising. And every investor “knows” that the US Fed...

EU patience starts to run out as UK threatens to break the N Ireland Protocol

Unsurprisingly, it turns out that Brexit still isn’t “oven-ready”, despite the UK ...

An end to the China bubble would risk a Minsky moment

My letter in today’s Financial Times warning of the risk to Western financial markets from the bur...

Xi aims to “bring order out of chaos” by bursting China’s property bubble

China is at the start of its biggest economic shake-up since 1978, when Deng Xiaoping launched his p...

Housing markets face long-term downturn as central banks abandon stimulus

Last month saw the beginning of the end for the central banks’ 20-year experiment with stimulu...

Businesses set for transformation as supply chain chaos combines with Net Zero targets

‘Business as usual’ seems a most unlikely outcome as we look forward over the next 6 months....


Market Intelligence

ICIS provides market intelligence that help businesses in the energy, petrochemical and fertilizer industries.

Learn more


Across the globe, ICIS consultants provide detailed analysis and forecasting for the petrochemical, energy and fertilizer markets.

Learn more

Specialist Services

Find out more about how our specialist consulting services, events, conferences and training courses can help your teams.

Learn more

ICIS Insight

From our news service to our thought-leadership content, ICIS experts bring you the latest news and insight, when you need it.

Learn more