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Costly oil could mean recession – Soros
David Goldman, CNNMoney
Investor tells lawmakers that economy is at risk as housing bubble deflates and rising oil prices rise. Senate panel probes whether speculators are manipulating prices.
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High oil prices, driven by decreasing crude supplies and increasing demand could drive the U.S. economy into a recession, George Soros, the fund manager and commodities investor, told lawmakers Tuesday.
The Senate Commerce Committee held a hearing on Capitol Hill in an attempt to find out if oil prices are being manipulated by speculators, what can be done to regulate commodities trading, and what effect high oil prices have on the economy.
Soros told the committee that speculation, while not the only contributor to the recent runup in crude, “reinforces the upward pressure on prices.” He said speculation is “distinctly harmful” to the economy.
(3 June 2008)
Related from Reuters: Oil price crash not imminent despite bubble: Soros.
India: Markets end deep in red on fuel price hike
TImes of India
MUMBAI: The market ended sharply lower on Wednesday reacting to the steep rise in fuel prices, which is expected to accelerate inflation to a 13-year high. Realty, metals and power stocks were the worst hit. Smallcaps and midcaps were not spared either.
The government on Wednesday hiked petrol and diesel prices by Rs 5 and Rs 3 a litre respectively and that of LPG by Rs 50 a cylinder while kerosene prices were kept unchanged.
(4 June 2008)
Asian Economic Miracle Is at Risk All Over Again
William Pesek, Bloomberg
Depending on whom you ask, China is either on the verge of a big slowdown or an inflation surge. Some worry Asia’s second-biggest economy faces both risks.
China’s situation suggests Asia is on the cusp of its worst couple of years since 1997. From Seoul to Jakarta and from Beijing to New Delhi, officials are grappling with a rapidly worsening inflation picture.
…“Inflation really has become THE issue,” says Richard Grainger, a director at Barclays Capital in Hong Kong.
Surging inflation is adding pressure on officials to raise interest rates as record oil and food prices undermine growth. That has created what central-bank heads such as Amando Tetangco of the Philippines call a “monetary-policy dilemma.”
(3 June 2008)
Suggested by contributor “driller.”
A new kind of ‘energy crisis’
Despite pain of high prices, there are no shortages or lineups
Barrie McKenna and Richard Blackwell, Globe and Mail
There was barely a whimper when the price of oil raced passed key milestones this decade – $50 (U.S.) a barrel, $80, even $100.
But with oil gaining strength at more than $130 a barrel, “shock” and “panic” have suddenly entered the popular lexicon.
Ominous comparisons are being made to the devastating oil jolts of the 1970s. And a global economy that once seemed immune to expensive oil is getting antsy.
Sometimes violent protests swept across Europe and Asia this week. Even in the United States, where cars are a religion, Americans are driving less for the first time since 1979, spurning SUVs and embracing public transit.
… But is this an energy crisis? That may be in the eye of the beholder.
Unlike a recession, which can be tracked and quantified, a crisis is about what an environment feels like. If you’re an auto maker or an airline, you’re in full crisis mode.
The sheer magnitude of the recent spike is impressive. Oil is up nearly 50 per cent this year and 85 per cent in the past two years. And adjusted for inflation, oil has never been this expensive.
But for pure shock value, the recent runup still pales compared to 1973.
That’s when oil shot up nearly fivefold (to $12 a barrel from $2.50), or 1979, when the price of oil more than tripled (to $40 a barrel from $12).
There are no embargos, no shortages and no lack of crude to feed refineries – as there were in the 1970s – and this isn’t yet a crisis, says Robert Ebel, a former energy specialist at the U.S. Central Intelligence Agency
The main threat now, he said, is inflation.
(29 May 2008)
Contributor Scott Chisholm Lamont writes:
A level-headed look at how the price of oil and other energy forms compares to past run-ups in terms of real effect on the ground. This includes looking at both the plus and minus impacts, such as mentioned for Greyhound.
I think that what we are faced with in the short term, and will have to adapt to, is inflationary pressure (and it seems many agree with this view, as today’s Globe & Mail reader poll demonstrates: Do you think energy-related price hikes will trigger large increases in the overall inflation rate? Yes: 87%; No: 13% – based on 3632 responses).
It is having some positive effect on re-localizing, and if foolish politicians leave associated taxes alone, may slow carbon emissions. What could potentially lead to a truly shocking price jump may be infrastructure related – I recommend reading Matt Simmons latest presentation (dated May 5 on his website) entitled “Oil And Gas “Rust”: An Evil Worse Than Depletion”. We are just one critical element failure away from the equivalent of an embargo.
