Rising oil price has wider impact

Higher petrol costs ‘act like a tax on consumption’

(CNN) — Higher oil prices are starting to cause havoc far beyond the petrol bowser. Slowly but surely, the rise in the price of oil is pushing up inflation and interest rates and affecting people’s spending habits and share markets.

Where the price of oil is headed is anyone’s guess. But predictions for the short term outlook range from the current level of around $74 to $100 a barrel by the end of the year before a possible retreat.

Mostly the outlook for oil prices comes down to supply and demand. With global production capacity at a very low excess (about 2 million barrels a day) and China ready to buy any oil there is, there is no shortage of demand.

Couple that with the problems facing most of the oil producing areas — Nigeria, Venezuela, Russia, Middle East and the Gulf of Mexico — the price of oil is not expected to retreat in the near future.

CNN