Winners and losers as commodities ‘super-cycle’ turns into mirage – by Oliver Kamm (The Times/The Australian – December 11, 2015)

These are tough times for commodity investors and resources companies. The price of Brent crude has dipped below $US40 a barrel for the first time since 2009 and is down by 60 per cent since the middle of last year. The share prices of mining companies fell sharply after news broke that Anglo American had cut its ­dividend.

Commodities are the biggest story of 2015, not only in markets and economics but also in politics and, of course, the environment. Cheaper fossil fuels pose a risk to strategies for mitigating climate change.

The collapse in prices is devastating for countries whose export earnings are dominated by commodities and that have squandered the proceeds of a commodities boom or siphoned them to private interests.

Russian President Vladimir Putin is a big loser from an oil price lower that $US90 a barrel: about 70 per cent of the nation’s revenue comes from oil and gas. Venezuela, which failed to diversify its revenue away from oil, is in crisis.

Conversely, this is a boost for the recovery in Britain and the eurozone. The collapse in commodity prices has fed through into an annual inflation rate of around zero for most of this year. Hence, nominal earnings growth and real earnings growth have been almost the same.
Lower energy prices have acted like a tax cut for both consumers and businesses — like a fiscal stimulus, but without depleting government revenues.

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