“The energy crisis continues…”

Energy instability is likely to continue in the short- to mid-term, with the EU needing to urgently find a solution to the cost-of-living crisis.

The looming ban on Russian crude has the oil industry on tenterhooks

Crude oil prices are engaged in a tussle between fears of a recession-led demand decline and ongoing supply tightness, with risks to demand currently edging ahead.

But many in the oil industry are concerned that supply tightness will make a comeback when the European Union ban on Russian crude imports comes into effect in December, and a similar measure on refined products in February 2023.

The industry is holding its first major face-to-face gathering in Asia at S&P Global Commodity Insights APPEC 2022 event, and uncertainty over how the ban will work in practice and how the industry will adjust was rife.

It’s safe to say that very few in the oil industry think the ban is a good idea, not only from the risk to supply, but also from the perspective of increased compliance, freight and other costs.

Italy’s right-wing winners inherit poison chalice

Italian politics has shifted decisively to the right. A coalition of parties led by nationalist Giorgia Meloni, EU-sceptic firebrand Matteo Salvini and convicted former Prime Minister Silvio Berlusconi secured a clear parliamentary majority in Sunday’s general election. Despite a show of unity on the campaign trail, the allies disagree on issues from Russian sanctions to spending. The rivalries risk undermining the debt-laden nation’s ability to confront an energy squeeze that represents its biggest challenge since the euro zone crisis.

The new government will replace the national unity executive led by former European Central Bank President Mario Draghi, which lasted just 18 months. Meloni’s far-right Brothers of Italy emerged as the largest party. That makes it likely President Sergio Mattarella will pick Meloni to be the country’s first female prime minister.

The 45-year-old, who started in politics at the age of 15 as a member of the neo-fascist Movimento Sociale Italiano, faces an uphill struggle. Soaring energy prices are destabilising large sections of Italy’s economy, possibly leading to rationing and a recession. The crisis threatens 120,000 companies and 370,000 jobs, says business lobby group Confcommercio.

Meloni, who said on Monday she wanted to unite Italy, supports sanctions against Russia and has stated Italy will stick to EU fiscal rules. Her advisers say the new government could slash a poverty relief scheme to fund tax cuts.

Bank of England ‘will not hesitate’ to act as it monitors market turmoil

The Bank of England said on Monday it would not hesitate to change interest rates and was monitoring markets “very closely”, after the pound plunged to a record low and British bond prices collapsed in response to the new government’s financial plans.

Finance minister Kwasi Kwarteng sent sterling and government bonds into freefall on Friday with a so-called mini budget that was designed to grow the economy by funding tax cuts with huge increases in government borrowing.

Such was the market turmoil on Monday there was growing speculation in financial markets that the BoE would make an emergency interest rate rise after it hiked rates only last week to 2.25% from 1.75%.

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