It is impossible to write about mortgage options for landlords without talking about interest rates. But it is impossible to talk about interest rates without talking about rapidly rising inflation, which it is impossible to talk about without talking about the soaring price of oil, which it is...oh, let’s just start with Putin!
While there is one person on this planet that has a better idea than anyone what the price of oil might be in a few months’ time, Vladimir Putin was unavailable for comment as he was too busy disrupting the global economy and destroying the lives of millions of innocent Ukrainians. Entire articles, and even books, are no doubt currently being written, aimed at describing why Putin is doing what he is doing.
We won’t attempt to read Putin’s mind in this article but the fact is that he has invaded Ukraine and where that decision eventually leads to is enough to keep many of us awake at night. Focusing instead on what is actually happening now, at the time of writing, oil prices (Brent Crude) had just jumped to more than $135 a barrel, the highest level since 2008, 39% higher than at the end of February and more than double what the price of oil was a year ago. By the time you read this article it could be at an all-time high of $150 per barrel or even more.
It seems almost unbelievable that the price of oil was less than $20/barrel in April 2020. There have been several reasons for this 7-fold increase in less than 24 months but the most recent boost to oil prices came when the US announced that it was banning all Russian energy imports, putting pressure on Europe to do the same. However, Europe appears to be stuck between a rock and a hard place as it gets around 40% of its natural gas and 25% of its oil from Russia, while the US gets no natural gas and only meager amounts of oil. An energy import ban by Europe would almost certainly cause a self-inflicted recession, just as its economy is starting to recover from the pandemic. It would also turbo-charge inflation to dangerous levels.
On Sunday 6 March, Shell defended its decision to continue buying Russian crude oil despite the invasion of Ukraine. The company said it was forced to buy oil from Russia in order to maintain timely supplies of fuel to Europe. A Shell spokesperson stated: ‘To be clear, without an uninterrupted supply of crude oil to refineries, the energy industry cannot assure the continued provision of essential products to people across Europe over the weeks ahead.’