Businessweek: Would $100 Oil Slam the Global Economy? by Stanley Reed

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Would $100 Oil Slam the Global Economy? by Stanley Reed

Analysts say most of the world's economies could weather the steeper price fairly well. But it could help put the brakes on U.S. " but probably not EU growth." Economists have been surprised how little the current high price of oil has damaged the U.S. and world economies. After all, prices have already soared by 300% since 1999, yet nearly all regions of the world continue to chug along. That's a big contrast to the oil crises of the 1970s and 1980s, which sent economies into major funks.ndeed, the key difference today from the supply-driven oil shocks of the 1970s and 1980s is that the current price boom is mostly driven from the demand side, thanks to a powerful cocktail of global economic forces. Emerging markets, including China and other Asian countries as well as the Middle East, are coming into their own as major energy consumers.

Europe would most likely be the best buffered from price increases. For one thing, the strong euro takes some of the sting out of rises in the price of oil, which is sold in dollars. European industrial countries such as Germany also are highly efficient in energy use—even more so than the U.S. And much of the energy they consume comes from natural gas and nuclear energy, where long-term contracts dampen sharp swings in oil prices. Moreover, taxes on fuels such as gasoline are so high in Europe that price increases in crude aren't felt as much by consumers as in the U.S. Europeans already shell out in the range of $7 to $8 per gallon for gasoline—higher than U.S. drivers would pay even if oil topped $100 a barrel.