The war in Ukraine and the consequent Western sanctions against Russia, including oil, has created a panic about crude shortages and the rising prices. European countries have not yet completely closed the Russian oil tap.

And Russian oil is being lapped up by China and India at discount rates. The United States had been pressurising the OPEC minus Russia to step up crude production to cover the shortages as well as keep the prices in control.

But there is another problem looming on the horizon, the rising apprehension that the advanced economies of the United States and Europe are slowing down and slip into a recession, partly as an after-effect of the Covid-19 pandemic of 2020 and 2021, and the disruptions it had created.

But the latest market analysis of the oil market by Citigroup suggests that oil prices are likely to move south, touching $65 a barrel by the end of 2022 and end up further down at $45 by end -2023.

The caveat is that prices will go down if the OPEC does not intervene, which is an ambiguous conditionality. If the global economy is going into a recession, there is not much that OPEC can do to boost global demand.

The demand for oil will grow if the world economies pick up momentum. It almost looks like a no-win situation. On the other hand, JP Morgan, another market analyst, has been warning that oil prices could touch $380 per barrel because of the shortages created by the sanctions on Russian oil exports.

The Western market analysts seem to be uncertain which way the market would go, and whether the slowdown in the global economy is something that can be avoided.

It is indeed true that oil prices are a good barometer of the state of the global economy. If the crude prices are too high, then there would be inflation, and it also could affect the demand for crude.

But if the interests are raised by the central banks of Western countries, then borrowing costs would go up and it would cause a slump in demand, leading to recession. The economic pundits are caught in a speculative whirl of their own making.

The plain truth is that cutting off the crude oil and gas supplies from Russia will create crude oil crunch which will raise the prices, but it is unlikely to go through the roof as speculated by JP Morgan, nor is it likely to go down to $45 as the Citigroup predicts.

The real problem facing the world economy is the slowdown in economic activity in Europe and America, partly due to labour shortages caused by the Covid-19 pandemic. Both America and Europe need more migrants to keep their domestic economies chugging, but there is no consensus about immigration in the Western countries.

Many of them have taken a strong anti-immigrant stance in response to the rising discontent among the voters at home who blame the immigrants for taking away their jobs. But there are enough and more jobs everywhere, in the advanced economies, the emerging markets and in the developing countries.

What is needed is investment and the creation of jobs worldwide. But the private sector in the developed world found that it is earning more profits by not hiring more people and being less productive. The money that remains unspent is now being shown as corporate profit.

The need of the hour is the expansion of the economy, creation of employment and investment in coping with the climate change challenge. The profits will be there but there is need to increase expenditure. Governments are spending more than the private sector companies, and this could cause an economic bust if the markets do not respond and make the economy run.