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Global economy, oil prices part ways

At the gas pump

TEXT OF INTERVIEW

Scott Jagow: Usually, when the economy slows down, so do oil prices. By many indications, the global economy is slowing down, but oil prices are going up. They're close to record highs this morning, above $76 a barrel. Our European correspondent Stephen Beard is with us. Stephen, what's going on with oil?

Stephen Beard: Yes this does really look counterintuitive doesn't it? Not only the prospect of a slowdown in the global economy, according to the IMF, but also the fact that a lot of hot money has left the oil market.

Jagow: What do you mean by hot money?

Beard: Speculative money, hedge funds that bet on the price of commodities like oil. Over recent years speculators were blames for these huge price rises in the price of oil. Now as a result of the subprime debacle, the banks have told the hedge funds, 'we're not extending you any more credit.'

Jagow: Yeah, people were blaming the speculators and now that money's gone and oil prices are still going up. So what are the causes here?

Beard: Well the most immediate cause is the claim that Israeli jets penetrated Syrian airspace. But also there are some slightly worrying figures about U.S. stockpiles of oil and gasoline inventories as well are at their lowest level in more than two years.

Jagow: And as far as the consumer is concerned, here in the States even, gas is quite low compared to what it's been over the last couple years, especially with oil being close to a record.

Beard: Yes, well 'stay tuned' is the only answer to that. Since gasoline inventories are at their lowest level for two years that does suggest that there are some price hikes in the pipeline.

Jagow: OK Stephen Beard, our correspondent in London, thank you.

Beard: OK Scott.

About the author

Stephen Beard is the European bureau chief and provides daily coverage of Europe’s business and economic developments for the entire Marketplace portfolio.

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