Studio Guest – Jürgen Pfister, Chief Economist Bayerische Landesbank

Jürgen Pfister, chief economist at Bayerische Landesbank talks with MADE IN GERMANY about the rising oil price and the role investors play in the oil market. DW-TV: Have you already stocked up on oil canisters at home? Jürgen Pfister: I think that would be very dangerous so we don’t do that. DW-TV: You don't do that Jürgen Pfister: No. DW-TV: How bad is the situation? Jürgen Pfister: It’s really quite bad and I think we’re a bit in an illusion because overall growth in the world economy and also Europe and Germany has been quite buoyant so far. But there are very clear signs of the slowing down of growth and I think the worst is still to come. So I think we’ll see a major dampening effect on growth from these rocket high prices. DW-TV: And the amazing thing is that only 10 years ago the situation was very different: Until 1999 a barrel of oil cost less than 10 Dollars, and prices increased at a pretty normal pace. Last year in August one barrel was still under 70 Dollars - but since then, it seems, all hell broke lose with the price of oil hitting one record after another. Is it really all because of higher demands, because of emerging economies like India and China or what's going on here? Jürgen Pfister: Well, I think the demand story is certainly a big part of the story. On the other hand we have important supply constraints that‘s to say developing new oil wells on the one hand and also refinery capacities. All this has been lagging in the last years or decades so I think the situation is very serious and on top of this we have these geo-political risks stemming from the conflicts in the Middle East, Iran and Irak. And on top we have the speculation by new investors. DW-TV: I was just going to say, so how do they come into all this? Jürgen Pfister: They simply detect a rise in price trend and of course they think they can easily earn money by this. They are emplifying this trend but they are not explaining the trend they are emplifying it. DW-TV: But if the situation is that bad then obiously we can’t continue to let this happen. Something must be done about it. What about regulations or anything like that? JP: Well, I think the most important aspect will come about almost by itself, that’s to say the high oil price is dampening growth, the inflation impact of high oil prices is bringing central banks to a raising interest rate and I think all that will lead to a burst of the bubble. (Interview: Monika Jones)

DW-World | June 17, 2008

Tags:. .bit. .seems. .middle. .cost. .raising