The global economy will have to adjust

Short term, there’s no doubt that oil at $250 a barrel would be as traumatic a shock to the world’s economic system as anything that has been thrown at it since the end of the Second World War. It would be worse than the oil shocks of 1973 and 1979.

Even as they stand now, oil prices have quadrupled since 2004; another doubling would be catastrophic for the world’s economy, which is already teetering on the edge of recession. The chances are that the lethal combination of stagnating output and rising inflation


Much of the reason why the price of oil, food and almost every other commodity has soared in recent years is down to the insatiable appetite of the Chinese for the raw materials of their industrial revolution. Even now China is growing at more than 10 per cent a year. (We’ll be lucky to see 1.8 per cent). But it is difficult to see it withstanding the impact of such inflation. Its heavy industrial growth is exceptionally energy-inefficient and dirty