Oil could give kiss of death to recovery
By Gregory Meyer and Michael Mackenzie, writing at Financial Times
This week oil climbed to $87 a barrel, its highest level since October 2008 and prompted concerns that triple-digit crude was once again in the offing…
The latest surge seems to have been prompted by rising confidence in a global economic recovery…
Worries about the Greek economy have pegged prices back over the last couple of days but the more bullish Wall Street banks see prices climbing further, with Barclays Capital forecasting $97, Goldman Sachs $110 and Morgan Stanley $100 next year.
But the higher prices go, the deeper the concerns that they will stifle global growth. Jeff Rubin, a former CIBC chief economist and author of a book on oil and globalisation, says: “Triple-digit oil prices are going to threaten a world recovery.”
Pricier oil and other key commodities, notably iron ore and copper, could ripple through the economy and financial markets, potentially triggering inflation and forcing central banks to lift interest rates from ultra-low levels. This could force bond yields higher, but lower the attractions of equities.
