Economic warfare, also known as economic war, is a strategy used by belligerent nations to weaken the economy of other states [1]. This is primarily done during or preceding a war, and aims to control the supply of critical economic resources through measures such as blockade, blacklisting, preclusive purchasing, rewards, and the capturing or the control of enemy assets or supply lines. The goal is to damage an enemy’s economy, which in turn weakens their ability to fight a war. Both sides utilized economic warfare tactics during the American Civil War [1].
References:
[1] Economic warfare [2] Economic warfare | international law [3] What Is Economic Warfare and What It Means for …So, What is happening with the crude price today?
Oil prices have surged after the announcement by OPEC and other oil-producing countries to cut output by 1.16 million barrels per day [1][3]. The announcement came as a surprise to the market and could potentially lead to global inflation [1]. The production cut is aimed at stabilizing global oil markets, and it is expected to curtail around 1% of the global oil supply [1]. The latest cuts could increase oil prices by $10 per barrel, and some analysts say that oil at $100 per barrel could be a possibility [3]. This news has led to oil prices being on track for their biggest gain in nearly a year [4].
References:
[1] Oil prices surge after OPEC’s surprise output cuts | Energy [2] Oil Prices Jump, Signaling a ‘Proactive, Pre-emptive’ OPEC [3] Oil prices surge after OPEC’s surprise cut, analysts warn …Well, what is OPEC+?
OPEC+ is a group of 23 oil-exporting countries that meets regularly to decide how much crude oil to sell on the world market [2]. It consists of OPEC members and other non-OPEC oil-producing countries such as Russia, Kazakhstan, and Mexico [2]. The group was formed in 2016 to stabilize the oil market by managing global oil supply and demand [2]. In response to the pandemic, the group cut production by more than nine million barrels per day in 2020 [2]. The latest cut by OPEC+ is a pre-emptive move due to weaker world demand for oil, and it involves Saudi Arabia, Iraq, and several Gulf states cutting their oil supplies by one million barrels a day, while Russia is extending its cut of half a million barrels per day until the end of the year [2].
References:
[1] OPEC : Brief History [2] Opec: What is it and what is happening to oil prices? [3] Explainer: What is OPEC?But, Saudi Arabia isn’t a partner of US?
Actually, Saudi Arabia is a partner of the United States, and the two countries enjoy a strong economic relationship [1][2][3]. The United States is Saudi Arabia’s second-largest trading partner, and the trade relationship between the two countries has long revolved around two central concepts: security and oil [2]. The relationship is based on the United States providing military protection for the Kingdom of Saudi Arabia in exchange for a reliable oil supply from the Saudis, pricing of oil in US dollars, and Saudi support for American foreign policy [2]. In 2019, U.S. goods and services trade with Saudi Arabia totaled $38.7 billion, with exports at $23.9 billion and imports at $14.9 billion [3]. The U.S. had a goods trade surplus of $1.1 billion with Saudi Arabia and a services trade surplus of $7.9 billion [3].
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[1] U.S. Relations With Saudi Arabia [2] Saudi Arabia–United States relations [3] Saudi Arabia | United States Trade RepresentativeHowever. in last week Saudi Arabia and Iran established a new partnership with China as Broker
Iran and Saudi Arabia have recently agreed to restore diplomatic ties after China-brokered talks [1][2][3]. The deal was signed in March 2023 and includes the reopening of embassies, security cooperation, and enhanced cooperation in trade, investment, technology, and culture [3]. The agreement is seen as a significant de-escalation in tensions between the two countries, which have been in conflict over regional issues, particularly Syria and Yemen [3]. The deal could have implications for a US-led effort to isolate Iran economically through sanctions, and it could lead to Saudi Arabian investment inside Iran [2]. The ability of China to broker the deal reflects its growing influence in the region, as it has been a top oil importer for both Iran and Saudi Arabia [3].
References:
[1] What to expect after Iran, Saudi Arabia agree to restore ties [2] Iran and Saudi Arabia agree to restore ties after China- … [3] Iran and Saudi Arabia Restore TiesSo, the decision of OPEC+ to cut oil production, will raise the oil prices and then the inflation?
The decision of OPEC+ to cut oil production is likely to raise the oil prices, which could add to inflationary pressures [1][2][3]. When the supply of oil decreases, but the demand remains constant or increases, the prices of oil tend to rise. This is because less oil is available, and buyers may be willing to pay more to secure the oil they need. Higher oil prices can lead to higher costs for businesses, which may be passed on to consumers in the form of higher prices for goods and services. This, in turn, can contribute to inflation, which is a measure of the overall increase in prices in an economy over time [1][3]. Therefore, the decision of OPEC+ to cut oil production is likely to have an impact on both oil prices and inflation.
References:
[1] How will OPEC+ cutbacks affect oil prices, inflation? [2] Oil prices surge after OPEC’s surprise cut, analysts warn … [3] Oil prices surge after surprise move to cut outputBut, How Inflation is Calculated?
Inflation is typically determined by measuring the rate at which prices of goods and services are rising over a given period of time [1][2]. This can be done using various methods, such as tracking changes in the consumer price index (CPI) or using other price indices that measure changes in specific sectors of the economy. The CPI is the most widely used measure of inflation in the US and is calculated by comparing the prices of a fixed basket of goods and services to previous prices, with the prices weighted according to how important they are to the average consumer [3]. The US government also uses other methods to measure inflation, such as the Producer Price Index (PPI), which measures the changes in prices of goods and services at the producer level, and the Employment Cost Index (ECI), which measures changes in labor costs over time [1]. Ultimately, inflation is determined by the balance between supply and demand in the economy, and can be influenced by various factors such as production costs, consumer demand, and government policies.
Read: Exploring the Impact of Food Inflation: What You Need to Know.
References:
[1] What Causes Inflation? [2] Inflation: Prices on the Rise [3] How does the government measure inflation?And, Currently How the Markets can Reduce the inflation? Rising Interest Rates…
There are several ways in which the markets can reduce inflation. One of the most effective ways is through the implementation of monetary policy tools, such as raising interest rates, which can reduce demand and slow down economic growth [1][3]. This can help to bring inflation under control by reducing the amount of money available in the economy, which can help to reduce inflationary pressures. Another way to reduce inflation is through the implementation of supply-side policies, such as increasing productivity and efficiency in the economy, which can help to reduce costs and increase output [3]. Additionally, governments can use fiscal policy tools to reduce inflation, such as reducing spending and increasing taxes, although these measures can be politically challenging [2][3]. Ultimately, a combination of these policies may be necessary to effectively reduce inflation in the markets.
References:
[1] How Does the Law of Supply and Demand Affect Prices? [2] Fiscal Policy: Taking and Giving Away [3] Methods to Control InflationSo, FED and Other Central Banks will continue to increase Interest Rates to stop de inflation?
It’s important to note that central banks, including the Federal Reserve, use a variety of tools to manage inflation and achieve price stability, not just increasing interest rates [1][3]. Interest rate adjustments are a common tool used by central banks to control inflation, but they may also use other monetary policy tools such as changing reserve requirements for banks, conducting open market operations, or adjusting the discount rate [1]. Additionally, central banks must balance their efforts to control inflation with other goals, such as promoting economic growth and maintaining financial stability [2]. So while interest rate hikes may be one way to address inflationary pressures, it’s not the only strategy that central banks may use.
References:
[1] Monetary Policy and Central Banking [2] What Central Banks Do [3] Why Does the Fed Care about Inflation?If FED continue to increase the Interest Rates the economy can collapse?
According to a research paper by a group of economists, including three Federal Reserve officials, raising borrowing costs to combat inflation has resulted in a recession in every instance since 1950 [1]. However, it’s important to note that the current situation is unique due to the Covid-19 pandemic’s disruption to the economy, War in Ukraine – Russia, and the Fed’s improvements in fighting inflation.
The decision to increase interest rates is a balancing act for the Fed, as it must also consider other factors such as economic growth and financial stability [2]. The credit crunch caused by recent bank failures may also impact the Fed’s decision-making regarding interest rates [2]. While raising interest rates can slow inflation, if it’s done too aggressively, it can negatively impact economic growth and potentially lead to a recession. Therefore, it’s important for the Fed to carefully consider all factors and adjust interest rates prudently to avoid destabilizing the economy [1][2][3].
References:
[1] Federal Reserve rate hikes likely to cause a recession … [2] When Will The Fed Stop Raising Rates? [3] The Fed, Still Inflation-Focused, Raised Rates Amid Bank …So, If Energy Markets continue to pressure crude prices, FED and Central Banks need to fins a different solution to control the inflation.
