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Speculations stir up energy and food crisis
Speculations on the financial market, including futures trading, have exacerbated the energy and food crisis by inflating prices in spite of a global economic slowdown, a discussion forum was told Wednesday in Jakarta
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Speculations on the financial market, including futures trading, have exacerbated the energy and food crisis by inflating prices in spite of a global economic slowdown, a discussion forum was told Wednesday in Jakarta.
In a seminar organized by the International NGO Forum on Indonesia Development, Agustinus Prasetyantoko of Atmajaya University said food and energy prices were expected to rise for years ahead due to increasing demand and shrinking outputs.
"With predictions of a slowing global economy and crisis fears, oil demand and prices are expected to fall.
"But what has happened is the price keeps on increasing. So this is a contradiction. It shows market speculation now plays a big role in determining prices."
Crude oil for June delivery was traded at $113.23 a barrel on the New York Mercantile Exchange on Thursday, 11:49 a.m. London time, as reported by Bloomberg. Oil futures, which have gained 76 percent in the past year, touched a record $119.93 a barrel on April 28.
The International Monetary Fund predicts world economic growth will slow to 3.7 percent this year, 1.25 percent lower than in 2007.
Commodities, Augustinus said, including food and oil, had become the anchors of financial derivatives and more and more commodities contracts were being traded in the futures market.
"When the futures are speculated to increase in price, the agricultural outputs as well as the price are expected to increase as well," he said.
Rice, soybean, wheat, corn and crude oil futures are traded on various American stock exchanges, including the Chicago Board of Trade and New York Mercantile Exchange, rubber on the Singapore Stock Exchange and palm oil on the Malaysian Stock Exchange.
The effect on commodity markets has been more intense recently due to the crisis is the U.S. financial market.
"The investors need to find new fields. Firms like Dow Jones that usually invest in traditional markets now are also heavily focusing on financial products tied to agriculture commodities," he said, adding that Indonesia could do little in the short term to ease the impacts.
However, he said one solution was to prevent capitals from flowing out of the country through monetary and investment policies, but that the solution depended on farsighted strategies to secure energy and food self-sufficiency.
"Why is Indonesia a net oil and grain importer now? I think there have been flaws in our long-term strategies in the past.
"If we had managed our oil production properly, we may have escaped the negative impacts of the oil crisis. We may even have enjoyed the benefits like oil-producing countries in the Middle East."
