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Oil bubble bust will hit Russia warns US banker

Posted by John Bonar on 28.06.2012 12:07 | Published in Макроэкономика

 

The fall in world oil prices is the beginning of a major shift in the global economy and the end of the "commodity supercycle," spelling trouble for raw material producer countries like Russia, a senior US banker said. “In general, when prices reach the point that spending on oil equals six % of gross domestic product, demand falls and growth starts to stall; the world economy hit that point just before the recent fall in commodity prices,” Ruchir Sharma, head of emerging markets at Morgan Stanley Investment Management, wrote in an article published in The Financial Times.

 

Now the commodity bubble is expected to implode, world oil prices will fall, while world  economic growth will accelerate, Sharma says. This process will last about twenty years, and then usher in a new decade of expensive oil. “The mania for oil bore striking similarities to the dotcom  mania of the late 1990s," Sharma says. "At the height of the dotcom bubble, tech stocks comprised 25 per cent of global markets. After the bust, commodity stocks – energy and materials – rose to replace tech stocks and, by the end of the last decade, accounted for 25 per cent of global markets too.”

The commodity mania gave rise to a new industry of investment funds that allow even ordinary people to trade in commodities. The total sum invested in commodity funds has more than doubled over the past five years to more than $400bn in 2011. (RIA Novosti)

 

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