High prices won’t stop the world going on growing

This time it is different. True, this is an oil shock akin to those that struck the world economy in the 1970s, for the price of oil


So will the surge in the oil price have similar consequences this time? It is a tough judgement because we don’t know how high oil will go, but it looks likely that this oil shock will have a less damaging impact than in the 1970s. However, since the price is unlikely to fall back as far, it will have a more lasting impact on our way of life.

Since oil is the largest single source of global energy, larger than natural gas or coal, and far larger than nuclear or renewables, a rising oil price pushes up the price of everything, including food. That squeezes living standards still further.

As a result some countries may well be pushed into recession. There is a good chance that will happen in the US and maybe here in the UK, though in both instances the prime culprit would be the end of the housing booms. The surge in the oil price just happens to come at a very bad time. But even if this does happen there are a number of reasons to suppose that the world will continue to carry on growing, despite the pressure from oil.

Independent