The unstable dollar continues to significantly add to both US and world economic woes. Thursday saw an enormous drop in rates at the New York Stock Exchange with the Dow Jones index losing more than 358 points, a collapse that was similar to one seen in 2006. The latest developments also greatly contributed to jitters at the Tokyo Stock Exchange, where the Nikkei index fell as much as 2.5 percent, losing over 307 points.
Many analysts link the current decline of world stock values with soaring oil prices, all the more so that crude oil hit a fresh historical high at 140.39 dollars (3,292.18 roubles. 88.91 euros. 70.39 UK pounds) a barrel on Thursday. Dmitri Smyslov, the chief analyst at the Institute of World Economy and Foreign Relations in Moscow elaborated on the problem. “What we see now is the direct repercussions of last year’s mortgage securities decline in the USA that led to a global financial crisis. For the moment, financial turmoil has substantially affected Stock Exchanges all over the world, and oil price hikes have weakened the economic environment in many countries. Most political commentators warn that the current crisis shall hardly show signs of abating before the middle of next year”.
As far as skyrocketing oil prices are concerned, there are both objective and subjective factors. For one thing, the move is directly linked with the dollar decline, with energy suppliers trying hard to repair losses in the wake of significant dollar jitters. For another, developing new deposits located offshore on continental shelves and other hard-to-reach areas lead to additional investments, something that propels oil prices to new fantastic highs. In addition, big companies now show a readiness to invest in raw materials, especially oil, non-ferrous metals, and grain in a bid to avoid losses and considerably boost assets. The current uneasy geopolitical situation in the Middle East also adds to the ever-increasing demand for raw materials. Pundits noted that Washington’s permanent sabre-rattling against Iran has repeatedly done enormous damage to world oil markets.
27 June 2008
Yevgeny Kryshkin
Voice of Russia World Service
http://www.ruvr.ru/main.php?lng=eng&q=28941&cid=57&p=27.06.2008
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