According to an article published today by the Wall Street Journal:
"By late June, the price of West Texas Intermediate was at $93 a barrel from just below $86 in April. It’s now hovering around $110 a barrel.
That the dollar price of oil is going up as many of emerging countries currencies are close to regular historic lows against the dollar, makes the local currency effects of the recent Syria-driven rises that much worse.
The rising panic is palpable. Losses on some of these currencies are accelerating away. The Indian rupee was at 54 against the dollar in May, was at 61 at the start of this month and has now breached 68.
"By late June, the price of West Texas Intermediate was at $93 a barrel from just below $86 in April. It’s now hovering around $110 a barrel.
That the dollar price of oil is going up as many of emerging countries currencies are close to regular historic lows against the dollar, makes the local currency effects of the recent Syria-driven rises that much worse.
The rising panic is palpable. Losses on some of these currencies are accelerating away. The Indian rupee was at 54 against the dollar in May, was at 61 at the start of this month and has now breached 68.
The result is likely to be stagflation as the Indian industry reacts to climbing prices and rising interest rates with belt tightening and desperate efforts to preserve margins by marking up their own prices.
What’s more, the degree to which India’s boom was sustained by credit expansion will also determine how much interest rates cause default rates to rise.
And India isn’t alone. Turkey, Brazil, South Africa and Indonesia are all suffering similar(albeit not quite as immediately severe problems. With most of these countries dependent on imported energy, the rising oil prices will tend to push them towards stagflation as well''.
