funds, and central counterparties — have become more important users of u. s. dollar funding, though they lack access to funding backstops, such as central bank facilities, in times of stress. cross - border links between banks and nonbank entities have also increased, and there has been a shift of global portfolios toward u. s. securities and cross - border lending into emerging market economies ( emes ), much of which is in u. s. dollars. changes in the functioning of financial markets have also affected how the financial system provides liquidity and transmits price changes, and many of the recent changes stem from the increased role of nonbank players. in markets with more standardized products, electronic trading has grown, increasing the use of high - frequency trading and the role of principal trading firms in providing liquidity. by contrast, other markets, such as funding markets for corporate credit, have grown significantly in size but continue to be traded over - the - counter with low levels of automated trading. the covid shock and its propagation the outbreak of covid - 19 and efforts to contain it generated simultaneous hits to aggregate supply and demand. voluntary and mandated quarantines, lockdowns, and social distancing efforts lowered aggregate demand, caused large job losses, and sharply increased uncertainty. workplaces closed and travel was curtailed, disrupting global supply chains. important sectors of the global economy, such as tourism and transportation, came to a rapid stop. as the concern about the virus spread, these effects grew. according to figures from the international monetary fund, we ultimately wound up with the deepest and broadest global recession since the great depression. 1 the “ dash for cash " as businesses scrambled to remain liquid amidst this global “ sudden stop, ” demand for liquidity in u. s. dollars increased globally. commercial entities with debt denominated in u. s. dollars sought to increase their holdings of u. s. dollars. unprecedented asset price volatility and record or near - record trading volumes led to significant margin calls, which amplified the demand for cash. some market participants may not have anticipated the size of these margin calls, and they were forced to sell less liquid assets rapidly to meet them. those forced sales on top of other pricing pressures, resulted in unwanted procyclicality. traditional sources of cash were unable to handle the significant and sudden increase in demand. normally, market participants can generate cash by converting assets to cash in secured funding markets or

, distant futures prices have risen sharply. in early august, prices for delivery in 2011 of light sweet crude breached $ 60 per barrel, in line with recent increases in spot prices. this surge arguably reflects the growing presumption that increases in crude oil capacity outside opec will no longer be adequate to serve rising world demand going forward, especially from emerging asia. additionally, the longer - term crude price has presumably been driven up by renewed fears of supply disruptions in the middle east and elsewhere. but the opportunities for profitable exploration and development in the industrial economies are dwindling, and the international oil companies are currently largely prohibited, restricted, or face considerable political risk in investing in opec and other developing countries. in such a highly profitable market environment for oil producers, one would have expected a far greater surge of oil investments. indeed, some producers have significantly ratcheted up their investment plans. but because of the geographic concentration of proved reserves, much of the investment in crude oil productive capacity required to meet demand, without prices rising unduly, will need to be undertaken by national oil companies in opec and other developing economies. although investment is rising, the significant proportion of oil revenues invested in financial assets suggests that many governments perceive that the benefits of investing in additional capacity to meet rising world oil demand are limited. moreover, much oil revenue has been diverted to meet the perceived high - priority needs of rapidly growing populations. unless those policies, political institutions, and attitudes change, it is difficult to envision adequate reinvestment into the oil facilities of these economies. besides feared shortfalls in crude oil capacity, the status of world refining capacity has become worrisome as well. crude oil production has been rising faster than refining capacity over the past decade. a continuation of this trend would soon make lack of refining capacity the binding constraint on growth in oil use. this may already be happening in certain grades, given the growing mismatch between the heavier and more sour content of world crude oil production and the rising world demand for lighter, sweeter petroleum products. there is thus an especial need to add adequate coking and desulphurization capacity to convert the average gravity and sulphur content of much of the world's crude oil to the lighter and sweeter needs of product markets, which are increasingly dominated by transportation fuels that must meet ever more stringent environmental requirements. yet the expansion and the modernization of world refineries are lagging. for example, no