With oil prices spiking on concerns that civil tensions in key producer could cause supply disruptions Business RT spoke with Vladimir Osakovsky, Chief Economist at Unicredit Securities, about the impact on Russia’s economy.
RT: What sort of danger do high oil prices represent to the global economy, could it cause a slowdown?VO: Well surely it is kind of obvious that the fuel and energy prices is a significant part of consumer spending in most of the developed countries, and also the developing countries. Therefore higher oil prices can seriously limit consumer incomes and slow down the economic recovery, which is already rather weak. So it is a big danger I would say.RT:What measures can be taken to mediate the effects of energy inflation?VO: Well I would say that there are two major factors which are driving the oil prices. Number one is clearly the political instability in the important oil producers, such as Libya. And of course this issue requires a solution in the country. And another basically is the unusual monetary policy measures in most of the developed countries, like the US for example. The big central banks are pumping in fresh liquidity, and this, one way or another, inflates commodity prices – and oil prices in particular – and I guess if this measure is about to be reversed next month then that could, in principle, pave the way for a correction in oil prices as well, theoretically.RT: On balance do you think high oil prices are good for Russia? Surely it means more money?VO: Sure, absolutely.One way or another high oil prices gives much more resources for Russia to deal with.That’s why, no matter what way you look at it, it is always better for Russia to have high oil prices than low oil prices.I guess the most important thing is to realize that the sustainability of these prices is the big question.RT:Commodities such as wheat, sugar and cotton are all near record highs. How serious a problem will inflation become for the world economy?VO: Again of course, it is a big problem.Most of these commodities that you mentioned are really a big item in the consumer bundle.So indeed, the high oil price, the high commodities prices it’s a big danger to the economic recoveries to most of the developing countries and most of the developed as well.So it is a big threat to the economic recovery which is already very weak.