- The Washington Times - Sunday, September 25, 2005

Special correspondent John Zarocostas recently interviewed in Burgenstock, Switzerland, James Newsome, the president of the New York Mercantile Exchange (NYMEX), on the boom in global commodity markets marked by the spike in oil prices. Mr. Newsome is a former chairman of the Washington-based Commodities Futures Trading Commission.

Question: Mr. Newsome, has the commodity boom peaked?

Answer: Well, I think markets ultimately react to market fundamentals. We look at the fundamentals — particularly in the energy sector, where there’s no short-term fix to the supply-demand imbalance that currently exists. So, it’s my expectation that higher energy prices are going to be with us for quite some time …

Specifically we’re talking about crude [oil], and then the refined products as well as natural gas, because ultimately those products are all intertwined. And if you look at usage and the small margin that’s there for refining capacity, oil production, all fundamentals point to higher prices, and I think the quickest change that could be made to the supply-demand balance is conservation.

But China, India — they continue to have stronger economies, and I think China remains the wild card on the whole energy mix, as most of their usage at this point is industrial. But they are very quickly growing a middle class, and as that middle class demands cars and other things we have, that’s going to put a lot of upward pressure on crude oil.

Q: Metals also have experienced a strong market, again driven by robust demand in the Asia-Pacific region. How do you see the outlook?

A: We’re very bullish about the metals complex. We think — with growing economies around the world, certainly with expanding construction in China, India and other parts of the world — it is going to continue to keep upside pressure on — certainly on industrial metals, and our hope is that as the world expands, that expansion is going to be long term and therefore helpful to our markets.

Q: Do high oil prices above the old Organization of Petroleum Exporting Countries benchmarks of $25 to $30 make ethanol and other bio-fuels an interesting proposition?

A: I certainly think that high crude prices are positive for those who support ethanol, and there’s no question in South America and the U.S. there are numerous plants under construction at this point. So I think ethanol could become a very key point of the refined-product mix.

Q: There’s been political controversy over Unocal’s acquisition last month by Chevron, after objections in Washington to its purchase by the China National Offshore Oil Corporation.

A: I can’t speak for what those in Washington feel, or what their motivations are. But when we look at the global component, we have to recognize energy markets are certainly global.

If a refinery in Venezuela goes out, it affects our markets, it affects worldwide markets. To the extent that refinery capacity increases anywhere around the world, I think that’s good news for customers.

Q: The dollar is still the key medium of exchange in the world oil market. But there’s talk the euro, and down the road other currencies, could be used.

A: That is correct, and most of the oil market seems comfortable with that. But there is no doubt that with the euro and other currencies gaining strength, there will continue to be discussion about trading products in other currencies.

Q: If the Chinese currency, the yuan, moved to a free float, could it be used in the global oil market?

A: I think if China decides to float their currency, that certainly makes their currency more viable in terms of using it in other commodity markets.

Sign up for Daily Newsletters

Manage Newsletters

Copyright © 2020 The Washington Times, LLC. Click here for reprint permission.

Please read our comment policy before commenting.


Click to Read More and View Comments

Click to Hide