HIGH OIL PRICES TO HIT ECONOMIC RECOVERY? - Food prices hit a record high last month, but the UN's Food and Agriculture Organisation says it is not a crisis yet. But high oil prices could reach crisis point shortly, according to the OECD's International Energy Agency. This week the agency said that oil bills are becoming a threat to the economic recovery.
Martin Essex, markets news editor of Dow Jones Newswires in London, says that oil prices are high at the moment due to a range of factors, including the severe weather in Europe, the US and China. He also says the tentative economic recovery is affecting prices while oil has become a source of speculation for traders. He says that oil prices are expected to hit $100 a barrel shortly - Brent in London is at $95 already. But prices are not expected to reach the highs of over $140 breached in 2008. Mr Essex says that oil is not the only commodity rising - he says that people who speculate are looking at every asset class and commodities such as oil, gold, copper and cotton are all seen as favourable. He says the higher the commodity prices go, the more pressure the tentative economic recovery comes under.
Mr Essex says that the rising oil prices also make food prices higher, as processing and packaging prices become more expensive. 'The whole global economy still relies on oil,' he states.
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MORNING BRIEFS - Reports this morning suggest that Ireland's banks could be forced to hand over billions of euro of healthy assets to a 'new NAMA' over the coming year. The Irish Independent reports that Financial Regulator Matthew Elderfield says another bank overhaul could see Irish banks transferring billions of euro of assets, including entire foreign operations, to a 'new NAMA' in the next few months. The banks would then have smaller balance sheets to fund, and the 'new NAMA' could warehouse the assets until they could be sold.
*** Systemic failures by the management of BP and other companies led to the Macondo Well blow-out in the Gulf of Mexico last year, according to a report from a official US inquiry. It also warned that industry complacency could cause a similar accident again. A report from the Commission set up by US President Barak Obama after the spill - and released this morning - says mistakes by BP, Halliburton and Transocean can be traced to management. The explosion at the Deepwater Horizon drilling rig on April 20 last killed 11 people and led to the biggest ever offshore oil spill.
***Hong Kong lawmakers have given final approval for the city's first minimum wage, but critics say it is too low for many low-income people struggling to make ends meet in the financial hub. The city's Legislative Council ushered in the new law by a vote of 44 to four last night after a day-long debate, approving a pay floor of 28 Hong Kong dollars ($3.60) an hour - well below many other international cities.
*** On the currency markets this morning the euro is trading at $1.3118 cents and 84.52 pence sterling.
