The G8 finance ministers met in Japan last weekend, where they confirmed what we have been saying for some time: “Elevated commodity prices, especially of oil and food, pose a serious challenge to stable growth worldwide, have serious implications for the most vulnerable, and may increase global inflationary pressures.” Forget about credit problems, housing, and the financial sector. Oil and other commodities are the big crisis now. But it's not as simple as it seems...
WHY YOU SHOULD LEARN TO LOVE THREE-DIGIT OIL
It seems clear to us that if oil were to rise much higher than $150 a barrel, its impact on the world economy would be severe. Probably, growth would short-circuit.
On the other hand, if oil prices fell back under $100 (as most drivers currently pray), everyone might breathe a sign of relief. But that relief would be short-lived.
Cheap oil now would only discourage new oil projects from coming online. It would put serious alternative energy development on hold. In the long run, energy would become even scarcer and more expensive.
When I was at the energy conference in Rio, a couple of weeks ago, one place we visited was the Petrobras facility. Petrobras, as you should know by now, is a Brazilian oil producer. In fact, it is the fastest growing major oil producer in the world, and the 2nd largest after Exxon Mobil, in terms of market capitalization.Read more...
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