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Page added on January 29, 2009

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Q+A: Bremmer and Roubini on protectionism, oil price

DAVOS, Switzerland (Reuters) – As governments grapple with the global crisis, politics has taken on central importance in determining the course of the world economy — and political risk is more significant than ever.


Two leading experts on the financial crisis and its political dimensions — RGE Monitor Chairman Nouriel Roubini and Eurasia Group President Ian Bremmer — gave exclusive answers this week to Reuters questions on the key risks for 2009 and beyond, and the countries to watch.


…Roubini – In the short run, the demand destruction in the global demand for oil will keep prices low and hurt a bunch of unstable petro-states. These petro-states should become less aggressive facing fiscal and financial pressures; but some may be tempted to convert the domestic anger triggered by economic malaise into an aggressive foreign policy stance. Over the medium term, oil prices will sharply rise again once the global economy recovers. The return to potential growth will imply rapidly rising demand from urbanizing and industrializing China, India and other emerging markets. Meanwhile, the supply response will be much slower as low prices in the short-run lead to less investment in new capacity. In addition, as peak oil factors take hold, unstable petro-states won’t invest enough in new capacity and even Middle East states will decide it is better to keep more of the limited and finite reserves of oil in the ground for future generations. This suggests the importance — for oil importing countries — to invest in alternative and renewable technologies as a new oil shock looms.


Reuters



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