Skip to footer

Greece debt crisis: How it could impact oil prices

The fallout from Greece's economic troubles could drag down the Eurozone, writes Charles Kennedy – and that has implications for oil prices around the world.

|
Alkis Konstantinidis/Reuters/File
A man cycles by fresh anti-EU graffiti in Athens, Greece on June 28, 2015.

The Greek tragedy is reaching its climax.

The discussions between Greece and its European creditors broke down over the weekend, with the two sides still at an impasse. Greek Prime Minister Alexis Tsipras balked at deeper austerity cuts to the Greek economy, cuts that are a prerequisite for further help from Berlin and Brussels.

As a result, Greece is approaching the precipice. With a massive debt payment due on June 30 to the IMF, Greece could default. The extent of the fallout is anybody’s guess, but Greece could see the value of its bonds plummet, putting its banks in crisis, and ultimately the country could be ejected from the Eurozone. The Greek government declared a bank holiday for six days in order to stop the cash exodus from the Greek financial system. (Related: New Safety Feature: A Smart Car Programmed To Let You Die?)

The crisis is dragging down global equity and commodity markets. Greece is not a major oil producer or consumer, so it won’t have much sway over oil markets directly. But the spillover could have two immediate effects on oil apart from supply and demand fundamentals.

First, the calamity is spooking investors who fear a broader contagion. While Europe has had several years to insulate itself from Greece’s problems, the mess is still weighing on the bloc’s economic prospects. That will likely pull down oil prices a bit. (Related: U.S. Oil Glut An EIA Invention?)

A second effect comes in the form of currency fluctuations. Greece’s calamity, and the rising prospect that it leaves the Eurozone, will damage the value of the euro.

As the euro takes a hit, the U.S. dollar looks better by comparison, both as a safe haven and as an investment vehicle. If the dollar appreciates, that will push down oil – since oil is priced in dollars, a stronger dollar makes it more expensive. (Related: This Week In Energy: Oil Prices Under Pressure From All Sides)

 

The effects could be temporary. If the chaos doesn’t spread beyond Greece, the markets will go back to business as usual. Even if Greece experiences dire economic consequences, if other EU member states are not dramatically affected, and if the euro itself appears safe, global markets including oil should move forward without lingering damage.

On the other hand, if Greece starts dragging down the Eurozone and the euro, oil prices could fall much further.

By Charles Kennedy of Oilprice.com

More Top Reads From Oilprice.com:

Original story: http://oilprice.com/Energy/Energy-General/How-Greece-Crisis-Could-Drag-Oil-Prices-Down.html

Source: http://oilprice.com/

You've read  of  free articles. Subscribe to continue.
Real news can be honest, hopeful, credible, constructive.
What is the Monitor difference? Tackling the tough headlines – with humanity. Listening to sources – with respect. Seeing the story that others are missing by reporting what so often gets overlooked: the values that connect us. That’s Monitor reporting – news that changes how you see the world.
editor@csmonitor.com
Subscribe
Mark Sappenfield
Editor

Dear Reader,

About a year ago, I happened upon this statement about the Monitor in the Harvard Business Review – under the charming heading of “do things that don’t interest you”:

“Many things that end up” being meaningful, writes social scientist Joseph Grenny, “have come from conference workshops, articles, or online videos that began as a chore and ended with an insight. My work in Kenya, for example, was heavily influenced by a Christian Science Monitor article I had forced myself to read 10 years earlier. Sometimes, we call things ‘boring’ simply because they lie outside the box we are currently in.”

If you were to come up with a punchline to a joke about the Monitor, that would probably be it. We’re seen as being global, fair, insightful, and perhaps a bit too earnest. We’re the bran muffin of journalism.

But you know what? We change lives. And I’m going to argue that we change lives precisely because we force open that too-small box that most human beings think they live in.

The Monitor is a peculiar little publication that’s hard for the world to figure out. We’re run by a church, but we’re not only for church members and we’re not about converting people. We’re known as being fair even as the world becomes as polarized as at any time since the newspaper’s founding in 1908.

We have a mission beyond circulation, we want to bridge divides. We’re about kicking down the door of thought everywhere and saying, “You are bigger and more capable than you realize. And we can prove it.”

If you’re looking for bran muffin journalism, you can subscribe to the Monitor for $15. You’ll get the Monitor Weekly magazine, the Monitor Daily email, and unlimited access to CSMonitor.com.

Subscribe to insightful journalism

QR Code to Greece debt crisis: How it could impact oil prices
Read this article in
https://www.csmonitor.com/Environment/Energy-Voices/2015/0630/Greece-debt-crisis-How-it-could-impact-oil-prices
QR Code to Subscription page
Start your subscription today
https://www.csmonitor.com/subscribe