Economists divided over threat of oil price hike to world growth
AFP, Paris
The recent surge in the price of oil has once again raised the spectre of an economic slowdown, in particular in the United States, but its impact has divided economists who say a critical factor is the length of time the price remains high. Oil prices eased back from record high levels on Thursday after Russia's justice ministry said embattled oil giant Yukos could continue oil production and sales. But despite this traders remained nervous about the risk of disruption to supplies from Russia, whose oil is seen as crucial for the world's future energy needs. On Wednesday New York's light sweet crude for delivery in September hit an unprecedented 43.05 dollars a barrel and set a record finish of 42.90 dollars, up 1.06 dollars on the day. According to Nigel Pain, an economist at the Organisation for Economic Cooperation and Development (OECD) in Paris, this is not good news when the world economy is in a recovery phase. However, he said if the rise was temporary it would be manageable and unlikely to derail the world economy. "It would nevertheless be different if prices were to remain stuck above the 40 dollars (a barrel) mark," he cautioned. Much may depend on whether prices, which are partly dependent on rumours about the state of Yukos and the speculation swirling around the company, will flatten in the coming months or whether the strength of world demand, notably in China, will help keep them high. Economists like Antoine Brunet, head strategist at HSBC-CCF, said the high rate could continue. It may not resemble a full-blown crisis as in the mid-1970s but rather a long, drawn-out trend "perhaps up to 50 dollars (a barrel) for 2005," he said.
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