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Boiling Oil Plays a Spoil Sport

2 min read

Most of the countries around the world are dependent on import of crude oil to fuel their industries and economic growth. The major economies of the world are recovering from recent recession are on their path of economic recovery. The rising oil price in recent past is going to play a spoil sport for such economies. Countries such United States, United Kingdom, European Union and Japan all had major plans to get their economies back on track for development but now are faced with a threat to that from rising oil prices. An increase in oil prices will significantly increase the cost of production across the board in these economic powerhouses. According to the IMF estimates world economy grew by 4.8% in the year 2010 but these estimates already have projected a lesser growth rate of 4.3% in the year 2011.

International Energy Agency (IEA) has already issued warnings concerning negative effects of sustained increase in oil prices in year 2011. The oil burden of an economy is going to be adversely effected in the current year as per IEA estimates. At prices of even $90 per barrel the oil burden of various economies of the world is fast approaching the threshold of 2008 recession. To make things worse oil prices have further above $ 100 per barrel barrier and there are no signs to recovery yet. Political situation in Middle East is getting volatile and the unrest is spreading in many countries within the region.

Many countries in the world have already developed strategic oil reserves which can be used to defer impact of this oil increase on their local industry. While developing countries like India which do not have any such reserves can provide very little resistance to this situation and may have no choice but to pass on this increase to the industrial and retail consumers.

Is the current trend is Oil prices is not curtailed soon it is bound to grip international markets and make economic conditions worse. World leaders are monitoring the current situation very closely and may come up with a solution to this. If things are left to take their own course it may turn into an ugly economic situation to tackle.

R Ambardar

All content in this article is for informational purposes only and in no way serves as investment advice. Investing in cryptocurrencies, commodities and stocks is very risky and can lead to capital losses.

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