Larry Fink, the head of BlackRock, the world's largest financial holding, noted in an interview with the BBC that if the price of oil rises to $150 per barrel, it could trigger a global recession.
Fink, who leads a company with assets of $14 trillion (£10.5 trillion), warned that high oil prices and the ongoing threat from Iran could have serious consequences for the global economy.
In an exclusive interview, he also dismissed the theory of a "bubble" in the artificial intelligence sector, but pointed out that modern technologies are leading to an oversupply of qualified specialists and a shortage of skilled workers.
Financial markets are experiencing fluctuations amid the conflict in the Middle East, as investors try to assess potential changes in energy prices.
According to Fink, it is currently difficult to predict the final outcomes of the conflict, but he highlights two possible scenarios. The first: if the conflict can be resolved and Iran is recognized as a legitimate country again, oil prices could fall below pre-revolutionary levels. The second: if the situation does not change, it will lead to a prolonged increase in oil prices above $100, which could result in serious economic consequences and possibly a deep recession.
In the UK, there is a discussion about the need to increase domestic oil and gas production in light of the sharp rise in energy resource prices. Yesterday, the organization Offshore Energies UK stated that without increasing domestic production, the country risks becoming dependent on imports amid growing global instability.
Fink emphasizes that countries need to approach energy balance sensibly, utilizing all available sources, and that a key factor for stimulating growth and improving living standards is ensuring affordable energy. He added that rising energy prices act as a regressive tax that primarily affects the poorer segments of the population.
Although solar and wind energy, as well as hydrocarbon extraction, are already developing in the UK, if oil prices reach $150 per barrel for an extended period, many countries will begin to actively transition to solar and wind energy. Fink believes that countries should not rely solely on one energy source but should seek alternative options.
“There is no similarity to the 2007-08 crisis.”
Some analysts point to parallels between current market conditions and the events leading up to the financial crisis of 2007-2008. Energy prices are sharply rising, and some experts notice signs of instability in the financial system. BlackRock, in turn, has restricted withdrawals from private credit funds due to investor concerns.
However, Fink insists that there is no basis to expect a repeat of the 2007-2008 crisis, when numerous banks went bankrupt or were bailed out. He believes that modern financial institutions are much more secure. “I see no similarities,” he states.
The issues concerning certain funds represent only a small fraction of the overall market, and investments from institutional investors remain high.
Fink also rejected the notion that investments in artificial intelligence, which have reached billions of dollars, are an exaggeration. “I see no signs of a bubble,” he emphasized. “Of course, there may be failures in AI, and that’s normal.” Last year, BlackRock joined a consortium that acquired one of the largest data center service providers, Aligned Data Centres, for $40 billion.
According to Fink, there is currently a race for technological superiority, and if the U.S. does not increase its investments in this area, China may surpass them. “We need to actively develop our capabilities in artificial intelligence,” he added, pointing to the high cost of energy as the main issue hindering the development of AI in the U.S. and Europe.
While China is actively investing in solar and nuclear energy, in Europe, he says, “everything is limited to talk without real action,” and in the U.S., despite energy independence, more attention needs to be paid to solar energy, as “we need cheap energy to transition to artificial intelligence.”
“Artificial intelligence will create new jobs.”
In his annual letter to shareholders, Fink indicated that the boom in artificial intelligence could exacerbate inequality, as the benefits will accrue to only a few companies and investors. However, in the interview, he noted that AI will create “a huge number of jobs,” including professions in electrical engineering, welding, and plumbing.
On the other hand, the development of AI may lead to a decrease in demand for some office professions, which will require a reassessment of necessary roles in light of changes in society. “We are too critical of many professions, and we should reconsider the approach that work in fields like plumbing and electrical work can be just as successful,” he added.
Fink noted that in the U.S. after World War II, “we created an education system that urged all young people to go to college.” In his opinion, this was somewhat excessive, and it is necessary to find a balance to take pride in the fact that a successful career is possible in technical professions as well.
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