But while President Biden’s top aides celebrate these economic developments, they also worry that the economy could suffer another major shock later this year, one that could plunge the country into a debilitating recession. White House officials fear a new round of European sanctions aimed at curbing the flow of Russian oil by the end of the year could send energy prices skyrocketing again, hitting already beleaguered consumers and plunging the United States and other economies into severe shrinkage. This chain of events could worsen an already severe food crisis plaguing countries around the world. To avoid that outcome, U.S. officials have clung to a never-tested plan aimed at depressing global oil prices — a plan that would complement European sanctions and allow critical Russian crude to continue flowing to global markets. , but at a much reduced price. Europe, which continues to consume more than two million barrels of Russian oil each day, is set to impose a ban on those imports at the end of the year, along with other steps aimed at complicating Russia’s efforts to export fuel globally. While Mr. Biden has pushed Europe to cut off Russian oil as punishment for its invasion of Ukraine, some forecasters, along with the president’s top financial aides, now fear that such policies could lead to massive amounts of Russian oil — which accounting for a little less than one-tenth of the world’s supply—suddenly withdrawn from the world market. Analysts have estimated that such a supply depletion could push oil prices to $200 a barrel or more, which translates into Americans paying $7 a gallon for gasoline. Global growth could reverse as consumers and businesses pull back spending in response to higher fuel prices and as central banks, already raising interest rates in an effort to tame inflation, are forced to make borrowing costs even higher. expensive. The possibility of another oil shock piercing the global economy, and perhaps Mr Biden’s re-election prospects, have driven the administration’s efforts to persuade government and business leaders around the world to sign off on a global price cap on Russian oil. It is a new and untested attempt to force Russia to sell its oil to the world at a deep discount. Administration officials and Mr. Biden say the goal is twofold: to starve Moscow’s oil-rich war machine of financing and to relieve pressure on energy consumers around the world facing rising fuel prices. To get its oil to market, Russia uses funding, ships and, most importantly, insurance from Britain, Europe and the United States. European sanctions, as currently constructed, would not only cut Russia off from most of the European oil market but also from other Western support for its missions. If strictly enforced, these measures could leave Moscow without means of transporting its oil, at least temporarily. The Biden administration’s proposal would not affect the European ban, but would relax some of the other restrictions — but only if the transported Russian oil is sold for no more than a price set by the United States and its allies. This would allow Moscow to continue shipping oil to the rest of the world. The oil now flowing to France or Germany would go elsewhere – to Central America, Africa or even China and India – and Russia would have to sell it at a discount.
8 signs the economy is losing steam
Card 1 of 9 An alarming prospect. Amid persistently high inflation, rising consumer prices and falling spending, the US economy is showing clear signs of slowing, fueling fears of a possible recession. Here are eight more measures that signal trouble ahead: Consumer confidence. In June, the University of Michigan survey of consumer sentiment hit its lowest level in its 70-year history, with nearly half of respondents saying inflation is eroding their standard of living. The housing market. Demand for real estate has fallen and construction of new homes is slowing. Those trends could continue as interest rates rise and real estate companies, including Compass and Redfin, have laid off employees in anticipation of a downturn in the housing market. Copper. A commodity seen by analysts as a gauge of sentiment for the global economy – because of its widespread use in buildings, cars and other products – copper has fallen more than 20% since January, hitting a 17-month low on July 1. Oil. Crude prices have rallied this year, partly due to supply constraints stemming from Russia’s invasion of Ukraine, but have recently begun to wobble as investors worry about growth. The bond market. Long-term government bond yields have fallen below short-term yields, an unusual event traders call a yield curve inversion. It suggests that bond investors are expecting an economic slowdown. Some economists and oil industry experts are skeptical that the plan will work, either as a way to cut revenue for the Kremlin or as a means of lowering prices at the pump. They warn that the plan could mostly enrich oil refineries and could be ripe for tax evasion by Russia and its allies. Moscow could refuse to sell at the maximum price. Treasury Secretary Janet L. Yellen plans to push for more support for the cap when she meets with other finance ministers from the Group of 20 nations — including Russia — in Asia next week. The US delegation will have no contact with the Russians, a Treasury official said. But even some skeptics say the price cap could, if anything, keep enough Russian oil pumping to avoid a recession-causing price spike. Administration officials say privately that there are signs in oil markets that even in its early stages, the cap proposal is already helping to reassure traders that the world could avoid a sharp loss of millions of barrels a day of Russian oil at the end of the year. Other administration officials have pressed the case for a cap on transatlantic video calls and in-person meetings in European capitals such as Brussels and London. They highlight recession risks in talks with other countries, private insurers and a host of other officials over how to structure and implement the price cap plan, which was approved in principle by Group of 7 leaders last week at a meeting in German Alps. “We definitely want to be mindful of downside risk and the fact that the cost to people is very high” at the pump, Wally Adeyemo, deputy finance minister, said in an interview. “We think one of the most effective things we can do to address the concerns we have is to implement a price cap — because it reduces the risk of a global recession and also reduces the price of one of the most important things for the global economy moving forward in front.” Dark clouds have gathered over the global economy in recent weeks. Researchers at High Frequency Economics estimated in a note to clients last week that recessions are already starting across Europe, Britain and Japan. Mr Biden’s closest economic aides insist the US economy has not yet hit recession, even as it faces what could be its second straight quarter of negative growth. Their case was bolstered by the continued strength of the labor market, which added 372,000 jobs in June and has yet to slow as many forecasters had predicted. Administration officials also see reason for optimism in last week’s drop in global oil prices, which should translate into substantial relief in coming weeks from the $5-a-gallon prices motorists are paying in many states this summer. The national average price per gallon fell to $4.70 by the end of the week, about 30 cents from a summer high. The spike in gas prices earlier this year was a direct consequence of the Russian invasion and the Western response to it, led by Mr. Biden, who moved quickly to ban imports of Russian oil into the United States and coordinate similar bans between of the allies. In some ways, the price cap proposal is an acknowledgment that those sanctions have not worked as intended: Russia has continued to sell oil at high prices — even taking into account the rebates it gives to buyers like India and China, which do not joined the oil sanctions — while Western drivers pay a premium. At its core, the cap proposal is an attempt to use Western influence over Russian oil shipments to dictate the price Moscow can charge for its oil exports. The cap plan seeks to keep Russian oil moving into the market, but only if it is heavily discounted. Russia could still ship its oil with Western support if that oil is sold no more than a price set by the cap. Negotiators are working to fix that price, which would be high enough to ensure Moscow still benefits from its oil sales, but lower than the price it now commands, about $30 below the global price.
The state of jobs in the United States
Job gains continue to maintain their impressive pace, easing concerns about an economic slowdown but complicating efforts to fight inflation.
Insurers and finance companies will have to join the effort to make it work. So would many of the countries outside of Europe who would buy the oil at a discount. But even if some countries refuse to sign, such as China and India, administration officials are convinced that a well-designed cap would lower prices anyway — because no country wants to pay more than it has to for any vital commodity. Ideally, officials say, the plan could lower global oil prices by reducing the risk of future supply disruptions, which traders may factor into their decisions. Some experts doubt the plan will work, saying it is ripe for circumvention and will…
