Andrew McKillop: Oil prices ... fiscal folly beings at Fifty-Five
<http://www.vheadline.com/readnews.asp?id=22909>http://www.vheadline.com/readnews.asp?id=22909
VHeadline.com oil industry commentarist Andrew McKillop writes: The G-7 finance ministers meeting of May 2004 to ‘solemly request’ that OPEC produce more and bring the price down was a sign that the old adage ‘Fear begins at 40’ still holds true.
Recent weeks have shown those same finance ministers and their central bank governors or presidents in much less rational mood.
No longer demanding the impossible -- that OPEC delivers oil at less than US$40-per-barrel through magically producing much more -- those same central bank directors are now preaching their own WMD: the interest rate weapon.
Anytime now, when oil prices climb through the ‘psychological ceiling’ of let us say $55/bbl, the round of small-and-predictable interest rate hikes by symbolic and tiny increments of 0.25% is likely to change gear and get more muscular.
While the big chiefs of the central banks do not sully themselves giving any numbers, their smaller minions are happy to give off-the-record, or ‘anonymous source’ interviews to the media. These pronouncements are echoed by eager and very concerned ‘experts’, such as those employed by Yergin’s CERA, who can recall way back times (the early 1980s) when the world, like today, was menaced by 'extreme oil prices'.
Utilising ‘fiscal rigor’ in the early 1980s to fight overpriced oil featured double-digit interest rates, delivering an economy that showed another kind of rigor -- rigor mortis. Only this, intense economic recession, reduced world oil demand enough for prices to finally be brought down, five or six years after ‘fiscal rigor’ was decided.
Several keywords, that is slogans, are recycled in the media by fit-to-print oil ‘experts’ and up-and-coming, but anonymous central bank minions.
In fact, however, the only real arm in the nearly bare closet of measures, ways or means to ‘fight overpriced oil’ is the IRW or Interest Rate Weapon. When or if interest rates are racked up by 0.5% or even 0.75% each time that central bankers decide to call a hike (to avoid 'overheating' or to cause a 'soft landing') we can be sure that we are in crisis times.... -------------- next part -------------- An HTML attachment was scrubbed... URL: <../attachments/20040925/87286578/attachment.htm>