August 26, 2007	Sunday	Sha’aban 12, 1428

RIYADH, Aug 25: The evolving dynamics of global economy is starting to impact the crude markets. With the world oil demand projected by various stakeholders falling into a still more widening range and the crude prices falling, the emerging market uncertainty seems steering the Opec towards status quo.

“Global markets are in a spin. We are heading towards a major recession,” Abu Dhabi-based veteran economic journalist Arshad Hussain said adding. “This is a patch work economy, run by the successive FED chairmen, from Mr. Greenspan to Mr. Bernanke, and this cannot go on.”

He emphasised that in the past only major wars, of global scale, had been able to bring the global economy out of the recessionary woes. Fears about the global economy are now beginning to be expressed all around.

Some are already arguing that problems in the US sub-prime mortgage sector are only the tip of a much larger problem and that their repercussions for the world’s largest economy could be severe.

A sharp downturn in US economic growth would have an immediate knock-on effect in China, where growth is driven by exports and export-orientated investment, both of which would be hard hit by a slowdown in US consumption.

In this case, oil demand growth could evaporate even in the booming economies of Asia, the London-based Centre for Global Energy Studies (CGES) argued. “The liquidity crises may be bigger than many realise,” said Nauman Barakat, senior vice president at Macquarie Futures USA. “Also, the dollar strengthening and gold collapsing are negative signs for energy markets overall.”

The CGES puts the onus on oil too for the current global economic woes. The impact of high oil prices on the global economy is clearly evident, it says.

“The Bank of England has raised interest rates five times in less than a year, while the US Federal Reserve increased rates ten times during 2005 and 2006. Inflation has been rising around the world as high energy prices are finally feeding through to other sectors,” the CGES says in its monthly oil report.

Four years of high, and rising, oil prices have taken their toll on global oil demand growth and look set to continue to do so,” it argued. “The spilling over of problems in the US sub-prime mortgage market into global stock and commodity markets has further weakened our view of demand growth,” CGES maintained.

Oil pries fell last week as worries over the US sub-prime mortgage sector battered global markets. Problems in US credit markets and the growing unease over the health of the US economy helped the US crude considerably nosedive below the August 1 record of $78.77 a barrel.Opec also warned that a slowing US economy and fallout from the sub-prime mortgage crisis could cut oil consumption in the rest of 2007. It cut its estimate for US economic growth this year to 1.9 per cent from the 2.1 per cent projected in July and warned of growing doubts about the outlook, impacting adversely the global crude demand.