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Pen Waggener
Two reports were published while all this was happening. Despite the fact that they were not widely disseminated, they can have great influence on Russia and the United States, as well as on bilateral relations.
First, Wood Mackenzie forecasted that the demand for oil in the world will reach its peak by 2036, which is earlier than most major oil companies believe. As Wood Mackenzie notes in its study, the earlier terms for achieving the highest oil demand indicators are a "tectonic shift" in the transport sector, which is actively moving to electric and hybrid cars. Therefore, starting from 2036, the demand for oil will begin to decline.
Hydrocarbons will not disappear as a source of energy, but their importance will decrease faster than experts assumed. How is this news related to the Helsinki meeting? Russia is the largest oil-producing state. The country’s economy depends crucially on the oil and gas exports. Putin failed to diversify the economy and reduce the country's dependence on hydrocarbons. Therefore, the drop in global demand for the main Russian export product will have a strong negative impact on the lives of Russians. It is quite obvious that deterioration of the economic situation has unfavorable and unpredictable political consequences.
The second news is related to a report prepared by the Institute of International Finance (IIF), which is located in Washington. The Institute was established by private commercial banks of the leading countries of the world with the aim of increasing the level of information support for participating banks, as well as to research issues of international credit. According to the Institute of International Finance, modern society is seriously suffering from fast-growing global debt. In 2003, the total debt in the world amounted to 248% of global GDP. At present, the size of the world's total debt has updated the historic maximum and is 318%.
The debt of a person, company or country is not a problem, if there is an income to pay interest, or someone who provides the necessary funds to repay the debt. But if the income is not enough to cover interest that is payable, or if creditors lose confidence in the borrower's solvency, then they stop lending. In addition, they will try to compensate for the loss. This is how financial crises are born.
Does this mean that we are on the threshold of a new financial crisis similar to the one that was in 2008? Not necessary. The world financial system is stronger today and better regulated. High debt can be sustainable and do not provoke a crisis as long as the world economy grows and generates the income necessary to service debts. The concern is that the global economic growth may slow down as a result of the trade war unleashed by Donald Trump.
The head of the world's largest investment corporation BlackRock, Laurence Fink, warned that the decision of the White House to increase customs duties and the response measures of those countries in respect of which these steps were taken will have a negative impact on economic growth, and the stock markets will fall. The same opinion is held by the head of the US Federal Reserve System Jerome Powell.
One of the main lessons of the 2008 crisis is that economic illness of any country quickly infects other states. Thus, if something happens to the US economy, it will affect the whole world. Another lesson is that economic crises distract from solving political problems, while political instability hinders the overcoming of economic difficulties. This is what is happening now.
source: elpais.com
First, Wood Mackenzie forecasted that the demand for oil in the world will reach its peak by 2036, which is earlier than most major oil companies believe. As Wood Mackenzie notes in its study, the earlier terms for achieving the highest oil demand indicators are a "tectonic shift" in the transport sector, which is actively moving to electric and hybrid cars. Therefore, starting from 2036, the demand for oil will begin to decline.
Hydrocarbons will not disappear as a source of energy, but their importance will decrease faster than experts assumed. How is this news related to the Helsinki meeting? Russia is the largest oil-producing state. The country’s economy depends crucially on the oil and gas exports. Putin failed to diversify the economy and reduce the country's dependence on hydrocarbons. Therefore, the drop in global demand for the main Russian export product will have a strong negative impact on the lives of Russians. It is quite obvious that deterioration of the economic situation has unfavorable and unpredictable political consequences.
The second news is related to a report prepared by the Institute of International Finance (IIF), which is located in Washington. The Institute was established by private commercial banks of the leading countries of the world with the aim of increasing the level of information support for participating banks, as well as to research issues of international credit. According to the Institute of International Finance, modern society is seriously suffering from fast-growing global debt. In 2003, the total debt in the world amounted to 248% of global GDP. At present, the size of the world's total debt has updated the historic maximum and is 318%.
The debt of a person, company or country is not a problem, if there is an income to pay interest, or someone who provides the necessary funds to repay the debt. But if the income is not enough to cover interest that is payable, or if creditors lose confidence in the borrower's solvency, then they stop lending. In addition, they will try to compensate for the loss. This is how financial crises are born.
Does this mean that we are on the threshold of a new financial crisis similar to the one that was in 2008? Not necessary. The world financial system is stronger today and better regulated. High debt can be sustainable and do not provoke a crisis as long as the world economy grows and generates the income necessary to service debts. The concern is that the global economic growth may slow down as a result of the trade war unleashed by Donald Trump.
The head of the world's largest investment corporation BlackRock, Laurence Fink, warned that the decision of the White House to increase customs duties and the response measures of those countries in respect of which these steps were taken will have a negative impact on economic growth, and the stock markets will fall. The same opinion is held by the head of the US Federal Reserve System Jerome Powell.
One of the main lessons of the 2008 crisis is that economic illness of any country quickly infects other states. Thus, if something happens to the US economy, it will affect the whole world. Another lesson is that economic crises distract from solving political problems, while political instability hinders the overcoming of economic difficulties. This is what is happening now.
source: elpais.com
