The World Economy is Doing Well with the Rise in Oil Prices

A number of economic declarations have been issued recently by major countries indicating that the world economy is performing well with high oil prices, without any increase in inflation accompanying the rise, unlike in the past.
The US Department of Commerce announced that the US’ GDP rose by 3.4% in the second quarter of this year. This rise is attributed to an increase in industrial investments, government expenditures and an improvement in the trade balance in favor of the US. This rise is taking place at the same time in which Brent oil rose from around $50 a barrel at the beginning of this year to its current average at $75 a barrel.
An increase of 3% in GDP is considered high, which means that the increase in the price of oil has not reduced the average consumption of the American family, or Americans’ purchasing power and fuel consumption, as was expected. The same is true for the Chinese economy, as growth rates remain at record high levels, despite the increase in imported fuel and a continuing rise in consumption rates in that country. The US is the biggest consumer of fuel in the world, followed by China. There was also improvement in the German economy, albeit relatively modest, during the last two months; Germany represents about a third of the price indicator in the Euro zone, which groups 13 countries. This means that the world economy has begun to do well with the record high price of oil, which has hovered between $70-80 a barrel in the last two decades.
Governors of central banks have been able to contain inflation by keeping interest rates relatively low; the process has also been helped by the strong entry of China and India into the world economy and into new markets that have been secured by the two commercial giants. Moreover, their exports are relatively inexpensive. The fall of the dollar against other hard currencies has kept down the price of imported oil, if only in relative terms, for many consuming countries.

Dar Al Hayat