IT’S ALL ABOUT ENERGY


It’s a well-known fact we all need energy to propel economies forward, but also to feed the human race.


When Brazil won the World Football Cup for the first time in 1958 the world population was under 3 billion. In the late 80’s when inflation in Brazil was out of control, the world population was over 5 billion and now, we are close to 7,9 billion people. So, demand for energy and food is ever growing.


For the past year we are seeing higher inflation, triggered by the post-pandemic recovery as the world, which slowed down in 2020/21, reaching the levels before. Looking back some 6 months, inflation was seen as transitory, nothing to worry about.


We now have many central banks and governments concerned that inflation may stay high if they don’t act. It’ fair to say that many didn’t expect the current Russia/Ukraine situation believing the West would intervene.


The flow of grains from Russia and Ukraine, mostly coming out via the Black Sea has been compromised triggering higher prices across other origins also helping to push inflation higher.


While the “West” and Russia are applying their attack/ defence strategies around energy (gas and crude), inflation is not going to go away so soon.


FOR THE PAST YEAR WE ARE SEEING HIGHER INFLATION, TRIGGERED BY THE POST- PANDEMIC RECOVERY AS THE WORLD, WHICH SLOWED DOWN IN 2020/21, REACHING THE LEVELS BEFORE.


With strong inflation and central banks acting against it, consumer’s buying power has been affected to a large degree and across the world with no exception.


So, in a few words, we need time for supply to improve, prices to get under control, and inflation to head lower. Meanwhile central banks will do what they can via higher interest rates.


On the political front, we are seeing many Nations’ having to intervene by trying to create greater supply (US releasing crude oil stocks), retaining crops (India and others stopping certain exports) and lower taxes on certain products like fuel (Brazil, perhaps US etc..).


There is a strong pressure on OPEC+ to increase crude oil supply as well on US to make “friends” again with certain nations, aiming to stop crude prices rising (achieved so far) and eventually fall. Perhaps lower prices are more a function of downgraded forward crude demand rather than greater supply.


The good news is that Russia/Ukraine found some compromise, which would allow grains to start flowing again from Ukrainian Black Sea ports. Time will tell how effective this agreement may be, but at least there is hope the worse could be over.


On the other hand, as the EU tries to increase their natural gas stocks in the summer and work towards lower winter demand, the supply of natural gas from Russia is being cut down, again and again so, natural gas prices in Europe, to say the least, are still soaring.


8 | ADMISI - The Ghost In The Machine | Q2 Edition 2022


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