Oil vs. global economic cycles deciphering the rhythms

As oil prices flirt with post-pandemic lows, we're exploring the relationship between crude (and other commodities) and the business cycle. Oil prices have a habit of cascading through global supply chains; to show how this is the case, we've charted the relationship between Brent crude and producer inflation (PPI) across major economies over the past two decades.

As our visualization shows, a particular correlation was shown between PPI (in China, Japan, South Korea, the UK, the US and the European Union) starting in oil's great mid-2000s boom - culminating when Brent peaked at almost USD 150 a barrel; this correlation also held through the oil bust that followed the global financial crisis. The synchronization between countries was striking at a time of ever-increasing globalization.

A second great period of synchronization can be seen before, during and after the disruptions of the pandemic (2019-21).

Interestingly, the current period (since 2024) has seen much less correlation: falling crude has resulted in little relief for the prices producers pay. This has arguably also been a period of de-globalization.

Our subsequent visualizations explore different correlations with the oil price - from the Federal Reserve's tightening and loosening cycles to US manufacturing inventories (i.e., inventory buildup = weakening demand) and the global money supply.