Investment bank Goldman Sachs on Wednesday warned of the potentially damaging effect for stock market investors of high oil prices, dubbing the process "the revenge of the old economy."
Peter Oppenheimer, the bank's head of European strategy, made one of the first attempts to place a precise estimate of the effect on stock markets of persistently high oil prices. He warned that a 20 percent rise in oil could result in a 15 percent knock to equity markets if other factors remain neutral.
He did not forecast that it would happen -- he still thinks a sideways movement in European stock markets is most likely -- but warned that oil price risks are "skewed significantly to the upside," especially if there is further disruption to existing production.
Jeffrey Currie, Goldman's European head of commodities, added that "a deep fundamental shift" has taken place in the oil market in the past three to four weeks. It is not just short-term spot oil prices that have risen, but prices for oil for delivery in 10 years' time have risen to over US$35 a barrel.
"What that is telling you is that there is potential for sustainability of these higher prices," Currie said.
He said the seeds of the crisis were sown over the past two decades as poor rates of return of energy-related investments persuaded investors to switch capital into the "new economy" industries such as telecoms and technology.
"We are not arguing that we are running out of oil; there are substantial re-serves," Currie said. "What we are running out of is the infrastructure to access, supply and deliver that oil. The last time we build infrastructure on that scale was the 1970s."
He estimates that industry investment now needs to run at US$200 billion a year.
The Ministry of Transportation and Communications yesterday inaugurated the Danjiang Bridge across the Tamsui River in New Taipei City, saying that the structure would be an architectural icon and traffic artery for Taiwan. Feted as a major engineering achievement, the Danjiang Bridge is 920m long, 211m tall at the top of its pylon, and is the longest single-pylon asymmetric cable-stayed bridge in the world, the government’s Web site for the structure said. It was designed by late Iraqi-British architect Zaha Hadid. The structure, with a maximum deck of 70m, accommodates road and light rail traffic, and affords a 200m navigation channel for boats,
PRECISION STRIKES: The most significant reason to deploy HIMARS to outlying islands is to establish a ‘dead zone’ that the PLA would not dare enter, a source said A High Mobility Artillery Rocket System (HIMARS) would be deployed to Penghu County and Dongyin Island (東引) in Lienchiang County (Matsu) to force the Chinese military to retreat at least 100km from the coastline, a military source said yesterday. Taiwan has been procuring HIMARS and Army Tactical Missile Systems (ATACMS) from the US in batches. Once all batches have been delivered, Taiwan would possess 111 HIMARS units and 504 ATACMS, which have a range of 300km. Considering that “offense is the best defense,” the military plans to forward-deploy the systems to outlying islands such as Penghu and Dongyin so that
WHAT WAS ALL THAT FOR? Jaw Shaw-kong said that Cheng Li-wen had pushed for more drastic cuts and attacked him, just for the outcome to be nearly identical to his bill The legislature yesterday passed a supplementary budget bill to fund the purchase of separate packages of US military equipment, with the combined amount of spending capped at NT$780 billion (US$24.8 billion). The Chinese Nationalist Party (KMT) and Taiwan People’s Party (TPP) used their legislative majority to pass the bill, which runs until 2033 and has two main funding provisions. One was for NT$300 billion of arms sales already approved by the US for Taiwan on Dec. 17 last year, the other was for NT$480 billion for another arms package expected to be announced by Washington. The bill, which fell short of the NT$1.25
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