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Oil prices could reach ‘uncharted waters’ if the Israel-Hamas war escalates, the World Bank says

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7 months ago

October 30, 2023

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Oil prices could reach 'uncharted waters' if the Israel-Hamas war escalates, the World Bank says

The World Bank reported on Monday that oil prices could be pushed into “uncharted waters” if the violence between Israel and Hamas intensifies, which could result in increased food prices worldwide.

The World Bank’s Commodity Markets Outlook found that while the effects on oil prices should be limited if the conflict doesn’t widen, the outlook “would darken quickly if the conflict were to escalate.”

The attack on Israel by the militant organization Hamas and the ensuing Israel military operation against Hamas have raised fears of a wider Mideast conflict.

And the threat of escalation looms. Israeli tanks and infantry pushed into Gaza over the weekend as Israeli Prime Minister Benjamin Netanyahu announced a “second stage” in the war. Hamas officials have called for more regional assistance from allies, including Iran-backed Hezbollah in Lebanon.

The World Bank report simulates three scenarios for the global oil supply in the event of a small, medium or large disruption.

Effects should be limited if the conflict doesn’t widen in a “small disruption” scenario — as oil prices are expected to decline from current levels of roughly $90 a barrel to an average of $81 a barrel next year, the World Bank estimates.

But during a “medium disruption” — equivalent to the disruptions experienced during the Iraq war — the global oil supply of about 100 million barrels a day would decline by 3 million to 5 million barrels per day, driving oil prices up possibly by 35%.

In a “large disruption” scenario — comparable to the Arab oil embargo of 1973 — the global oil supply would shrink by 6 million to 8 million barrels per day and prices could go up by 56% to 75%, or to $140 to $157 a barrel, according to the report.

Indermit Gill, the World Bank’s chief economist, said Russia’s invasion of Ukraine has already had disruptive effects on the global economy “that persist to this day.”

“If the conflict were to escalate, the global economy would face a dual energy shock for the first time in decades — not just from the war in Ukraine but also from the Middle East,” Gill said.

Ayhan Kose, the World Bank’s deputy chief economist, said higher oil prices will inevitably result in higher food prices.

“If a severe oil price shock materializes, it would push up food price inflation that has already been elevated in many developing countries” as a result of Russia’s Ukraine invasion, Kose said. “An escalation of the latest conflict would intensify food insecurity, not only within the region but also across the world.”

Overall, oil prices have risen about 6% since the start of the conflict. And gold — a commodity that tends to rise in periods of conflict — has increased roughly 8%, according to the World Bank.

Some analysts are skeptical that the U.S. would experience massive oil shortages, since U.S. oil production is at an all-time high.

At a Bloomberg event on Thursday, Treasury Secretary Janet Yellen said the Biden administration was monitoring the economic consequences of Israel’s war against Hamas carefully.

“So far, we have not yet seen much that has global consequences,” she said, but if the war spreads “of course there could be more meaningful consequences.”

International Energy Agency Executive Director Fatih Birol said between Russia’s invasion and the latest violence between Israel and Hamas in Gaza, “no one can convince me that oil and gas are safe and secure energy choices for countries or consumers.”

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Star Entertainment says Hard Rock-led group weighs bid, shares surge

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7 hours ago

May 20, 2024

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Star Entertainment says Hard Rock-led group weighs bid, shares surge

Star Entertainment (SGR.AX), opens new tab said on Monday a consortium led by Florida-based Hard Rock Hotels & Casinos is considering a bid for the cash-strapped Australian firm, sending its shares 20% higher.

A potential takeover by entertainment giant Hard Rock would provide a much-needed financial lifeline to Star, which has been plagued by a regulatory inquiry into its flagship Sydney casino operation and an executive exodus.

Star, which had a market value of A$1.29 billion ($863.66 million) as of Monday’s close, said it has been approached by a consortium of investors which includes Hard Rock Hotels & Resorts (Pacific).

The company said it understands Hard Rock Hotels is a local partner of Hard Rock.

Earlier in the day, Star said it had received “inbound interest from a number of external parties” but flagged none of them had yet resulted in “substantive discussions”.

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Business

Red Lobster seeks bankruptcy protection with $100 mln in financing commitments

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7 hours ago

May 20, 2024

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Red Lobster seeks bankruptcy protection with $100 mln in financing commitments

U.S.-based restaurant chain Red Lobster has filed for Chapter 11 bankruptcy protection in a Florida court after securing $100 million in financing commitments from its existing lenders, the company said on Sunday.

The company listed its assets and liabilities to be between $1 billion and $10 billion, according to a court filing.

Red Lobster said its restaurants will be open and operate as usual during the bankruptcy proceedings, and plans to reduce its locations as well as pursue a sale of substantially all its assets.

The restaurant chain also said it has entered into a “stalking horse” purchase agreement to sell its business to an entity formed and controlled by its existing term lenders.

“This restructuring is the best path forward for Red Lobster. It allows us to address several financial and operational challenges and emerge stronger and re-focused on our growth,” said Jonathan Tibus, CEO of Red Lobster.

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Business

BMW imported 8,000 vehicles into US with parts from banned Chinese supplier, Senate report says

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7 hours ago

May 20, 2024

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BMW imported 8,000 vehicles into US with parts from banned Chinese supplier, Senate report says

German automaker BMW (BMWG.DE), opens new tab imported at least 8,000 Mini Cooper vehicles into the United States with electronic components from a banned Chinese supplier, a U.S. Senate report released on Monday said.

A report by Senate Finance Committee Chairman Ron Wyden’s staff said BMW imported 8,000 Mini Coopers with parts from a Chinese supplier banned under a 2021 law and that BMW continued to import products with the banned parts until at least April.

BMW Group said in an email it had “taken steps to halt the importation of affected products.”

The company will be conducting a service action to replace the specific parts, adding it “has strict standards and policies regarding employment practices, human rights, and working conditions, which all our direct suppliers must follow.”

Congress in 2021 passed the Uyghur Forced Labor Prevention Act (UFLPA) law to strengthen enforcement of laws to prevent the import of goods from China’s Xinjiang region believed to have been produced with forced labor by members of the country’s Uyghur minority group. China denies the allegations.

“Automakers’ self-policing is clearly not doing the job,” Wyden said, urging the Customs and Border Protection agency to “take a number of specific steps to supercharge enforcement and crack down on companies that fuel the shameful use of forced labor in China.” Customs and Border Protection did not immediately comment.

The report found that Bourns Inc, a California-based auto supplier, had sourced components from Sichuan Jingweida Technology Group (JWD). That Chinese company was added to the UFLPA Entity List in December, which means its products are presumed to be made with forced labor.

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