With Europe entering a hot period, we’re used to checking the weather forecast for the actual temperature, and the “feels like” temperature. Societe Generale commodities analysts have put together a similar framework for the recent oil price spike.

And because of inflation, and because oil consumption as a percentage of GDP is falling for most countries, they say it takes much higher prices to generate the same impact as 10 years ago.

Take China for example, SocGen reckons oil prices would have to rise to $81 a barrel, from around $67 right now, for the impact on China to be equivalent to what $68 a barrel would have been in 2015.

To get that, they reckon the fall in the oil intensity of Chinese GDP counts for $13, the effect of inflation accounts for $11, though a softer yuan moves things $11 in the other direction.

The impact for the U.S. is even more striking, as there’s no FX moves to worry about, and there’s been a lot more inflation.

They reckon $68 a barrel in 2015 would “feel like” $109 a barrel today.

Given that, it’s not surprising that market stress stayed relatively constrained in the past two weeks, even as the price of oil rose.

In case you were wondering, it’s 27 degrees Celsius in London’s Canary Wharf business district, but feels like 28, according to my phone.
Source: Reuters (Alun John)