As economic prospects in Europe and abroad became dimmer due to the skyrocketing prices of energy, a high-flying US dollar drove currencies across the world to their lowest levels in years. Due to the increasing prices of natural gas and power in Europe, the euro plummeted to a 20-year low against the dollar. Currency traders voiced concerns that if Russia halts the supply of natural gas, which is necessary for basic services such as heating homes, keeping lights on, and running factories, the European economy could collapse. Labor unrest at Norway's main gas fields, which serve most of Western Europe, contributed to an increase in energy prices.
Energy Prices – From Bad to Worse
After the outbreak of the COVID-19 pandemic and the relaxation of restrictions later, the prices of energy began to rise. As the EU, the US, and the UK moved to economically isolate Russia, the Russia-Ukraine conflict contributed to further increase in fuel prices. There is a risk that Russia will reduce production in retaliation to the G7’s efforts to cap prices. The prices of oil could quadruple if Russia decides to curtail production. The price of a barrel of oil is $112. Investors took into account the ongoing strike by oil and gas workers in Norway, the top producer of oil and gas in the region, as European natural gas prices rose to four-month high. On July 5, Germany enacted laws that will allow the government to aid energy businesses that are being overextended due to the reduced supply of gas from Russia.
Risk of Recession in Europe
Owing to the increasing costs of oil and gas and the ongoing conflict in Ukraine, Europe is at risk of entering a recession. Another risk to the European economy is the decline in demand in the US. The annual rate of inflation in the Eurozone reached the highest level since the bloc's founding in 1999. According to experts, Europe's economic downturn will not end until the summer of 2023.
Strong Dollar Helps the US Ease Inflation Woes
The US Federal Reserve raised interest rates to combat decades-high inflation, which resulted in an 11% increase in the US Dollar Index so far in 2022. A stronger dollar makes it more affordable to import goods into the US and allows American tourists to spend more money in Europe. The strength of the dollar, however, could potentially reduce the sales of US businesses that export goods.
Don’t wait - discover a universe of connected data & insights with your next search. Browse over 28M data points across 22 industries.
Access more premium companies when you subscribe to Explorer
Contact the team or request a demo to find out how our data can drive your business forward