Economic News: Financial Crisis and Volatile Markets

29 September 2008

Financial Crisis and Volatile Markets

How will the ongoing economic crisis affect environmental projects?  This is a serious and worrying question.  Will the lack of liquidity in the banking system stop some of the more promising alternative energy projects? Will the recession and job fears make people avoid more expensive, environmentally friendly products?  Or will consumers make savings by going towards a frugal, low energy future, buying bicycles and insulation rather than SUVs and halogen lighting for their kitchens?

It remains to be seen just how severe an impact the still-tightening credit crunch and crisis of financial institutions will have on the ‘real’ economy, which has become so dependent on the over-extension of credit in recent times. But it should be clear that governments of varied political persuasions will soon be facing hard decisions about whether to cut public spending, or raise taxes, or both, to meet their commitments, which includes various obligations to reduce carbon emissions and other environmental matters.

Dungeness B Nuclear Power Station
French energy supplier EDF -  the world's biggest producer of nuclear energy - agreed a £12.5 billion bid for British Energy gaining control of Britain's nuclear power industry after months of wrangling.
The supposedly renascent nuclear industry is also likely to have difficulties with financing its large projects. Lower economic growth also means lower pollution, as consumers travel and buy less and manufacturers pump out fewer greenhouse gases.
Elsewhere, oil prices continued to be volatile, dropping below $100 then reaching highs of over $120 during the month, with a one-day rise of $25.00, the greatest market fluctuation ever recorded for this commodity. This is the sort of indicator that peak oil theorists such as energy banker Matt Simmons have been predicting: high volatility as the world reaches a plateau of oil production.
George Soros, the billionaire speculator who famously bet against the pound, causing the UK to withdraw from the European Exchange Rate Mechanism in 1992, said recently on Channel 4 News that the crisis was just beginning. The financial crisis is far from over. 

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