Oil crisis gives energy to new world order

The IMF sees plenty to be worried about. In real terms, the cost of crude is not back to where it was at the time of the Iran-Iraq war at the start of the 1980s, but that was the only time prices have been higher. The IMF has been surprised at the modest impact of dearer energy on the global economy, believing that the inflationary effects have been mitigated by the credibility of central banks and by the competitive pressures of globalisation. But, as the IMF correctly sees it, there is no iron law that says this state of affairs will persist. It argues that the full impact of higher oil prices has yet to be felt, that the geopolitical risks of a further rise in prices are high and that supply constraints mean that high prices are likely to persist for longer than they did in the 1970s.

At some point, the global economy will suffer from high oil prices; nobody is sure at what point but it’s a fair bet that a year of prices at $75 a barrel would have a marked impact on growth. In Britain, where the level of taxation has resulted in some of the highest prices in the west, a litre of unleaded is threatening to breach the

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