At less than $60 a barrel, oil prices seemed stable on Monday. But if merger and acquisition (M&A) deals are anything to go by, oil and gas are on fire. China and Russia are the countries that are flaring prices of these and other commodities.
A Financial Times story quoting a report by PricewaterhouseCoopers said that in the second quarter of 2009, Chinese and Russian firms paid $24.2 billion of the $48 billion in the top 50 such deals. Chinese firm Sinopec’s $8.8 billion purchase of Addax Petroleum, and Russian giant Gazprom spending $8.3 billion in such deals were the highlights. In contrast, there were only two deals in excess of $5 billion in 2008.
This is not an isolated case of oil and gas: Chinese hoarding of commodities (such as metals) may well be responsible for their prices shooting up. As a result, there may be more than mere economic logic in M&A deals at the bottom of the business cycle. This has the potential to fuel a cycle of hoarding-led price rise of manufactured goods and a return of inflation later in the year.