Growth forecast for UK economy will be hit by rising oil price

The post-credit crisis economic recovery could be “snuffed out” by high oil prices, experts have warned, as the price of crude broke through the $120 mark for the first time.

The influential Ernst & Young Item Club warned that rising oil prices may force it to slash its growth forecast for next year dramatically, and could cause inflation to as much as double. It came as crude prices passed through the $120 mark yesterday for the first time on record, amid fears about disruptions to the supply in Nigeria and Iraq.


US light sweet crude rose to a record $120.21 a barrel during morning trading in New York, though it later dropped back down beneath the landmark figure, closing up $3.65 at $119.97. The increase is expected to push petrol pump prices higher in the coming weeks.

If oil prices remain at their current levels the Item Club warned that it will have to cut its economic growth forecast for next year from 1.5pc to an anaemic 1.3pc. Inflation would also be higher than 3pc for the next three years, it added.

Telegraph