At first, economic resilience in the face of spiking oil prices came as a relief to economists. Now it is more of a quandary: what is sustaining the global economy, and how long can it last?
Some analysts believe the resilience owes more to temporary buffers than any real underlying strength. Since the start of the year, more than 300mn barrels of petroleum have been released from strategic reserves, offsetting almost a third of what has been lost since the US and Israel’s attack on Iran led to a halt on exports through the Strait of Hormuz. These have cushioned the impact of soaring energy prices, but drawing them down has left the system with far less resilience to another shock.
Tiffany Wilding, economist at Pimco, warns that with system flexibility so low, “the room for error is minute”, adding: “Without a normalisation in the free flow of trade through the…
