Volatility Likely To Keep Oil Prices Elevated

(MENAFN- Khaleej Times) Renewables are not going to solve the global energy issues anytime soon, and the current volatility in the oil market is likely to keep prices elevated for some time, an expert said.

“Rising energy prices means rising inflation. With the unfortunate war in the Ukraine and oil and gas not flowing as it should, inflation will remain a major concern,” Kim Fournais, the founder and CEO of Saxo Bank, told Khaleej Times in an interview.

As central bankers around the world seem settled on a 'higher for longer' policy on rates, Fournais believes the origins of the current crisis goes right back to the 1970s and 1980s, which was the last big era of inflation.“At Saxo Bank, we started talking about inflation and all this happening back in the beginning of 2021 when literally no one talked about that including central bankers. So honestly I'm not super surprised that we are where today. Rates went higher, and then during the 2008 global financial crisis, and again during the Covid-19 pandemic, rates went lower and lower, they even had negative interest rates. This was a crazy phenomenon. These so-called modern monetary theories, I don't think are very modern. The notion that you can keep pumping out debt and just kind of have helicopter money and then everything is gonna go all the problems would be solved. You can't presume that helicopter money will solve all problems,” he said.

“I think is what we're seeing now that has obviously created a big problem and when you then have those impacts from a Ukrainian war and you see energy prices coming up like that and you see supply chain disruptions then you have all the elements of another big crisis,” he added.

The rising rates also pose a major problem for emerging economies, as a stronger US dollar causes them to pay back more on top of the higher rates. As a result, refinancing of all this debt will take a toll on these countries' economies, Fournais said.

While equity markets remain high, some weaknesses are showing, and this is the time to watch out, Fournais said.“ A lot of asset managers have had a big portion in fixed income and saying this is a low risk. And fixed income have turned out not to be the low risk, but the high risk component and if stocks start falling as well, it's gonna be more difficult, right? There are some key things that I would like to check for. Do they have a good cash flow and do they have good solvency? Rates will go down again and if that's not happening, I think it could turn around quite quickly,” he stressed.

Fournais started Saxo Bank as a fintech on September 15, 1992.“Back then, nobody even knew the term fintech. We launched the first internet trading platform in April 1998. It provided the unique ability for investors to access global markets anywhere. And that's both stocks or bonds commodities, so you can trade oil or gold or fixed income products or whatever,” he added.

it is critical for fintechs to be able to navigate, especially markets like the ones we see now, Fournais said.“When I started this, I had investors that came with €70,000, which is, you know, not a lot of money. And that was my serious A round. And since then, we have actually grown with money we ever got from the outside. Then we have been running a profitable business ever since and really grown organically. We've made some acquisitions but with our own money? And the reason I'm saying that is that this is in hard contrast to the modern fintechs, which are doing series A round, B round C, round D round and so forth. And very few of them have turned a profit,” he said.

That may be okay when in a negative interest rates regime and capital flowing freely.“But I think now is the becoming more the moment of truth going back to what I said before that now if you make no money and you don't have a positive cash flow and you're in constant need of other people's money to finance your business,” Fournais said.

The Saxo Bank founder praised the UAE's ecosystem for start-ups.“The UAE is open for business in a way that you don't see many other places in the world. This is a stark contrast to what we see in Europe where the rules and regulations are more difficult,” he added.

Saxo Bank recently signed an agreement with Christies.“It's good for a creative mind to see the all these art pieces. Art is close to our kind of minds and I think a creativity and innovation. Is very important and I think art is a very basic form of that. And of course also there are there are many synergies between the people that are interested in Christies are typically also the people that would have money to invest not only in art but hopefully also in the global capital markets. So I think for Saxo and Christies to come together and to create some interesting events for clients is definitely something we are looking forward to,” Fournais said.

Saxo Bank began operations in Dubai in 2009.“The business is growing and we would like to continue to grow the business,” Fournais said.“The prime focus for growth is really to focus on where we are, what we're doing with our clients and our partners and and and then do our very best to be even more meaningful for them in their lives or their businesses,” he added.

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