Section II. The impact of higher oil prices: a return to the 70s?

Extract

The sustained increase in the price of oil has generated considerable concern about the impact of higher oil prices on the world economy. The price of oil has risen from $11 a barrel in the first quarter of 1999 to around $31 a barrel in the third quarter of 2000, and is now at a 15 year high in real terms. Global demand has been increasingly strong and supply has been restricted. Economies with a strong dependence on imported oil, for instance in East Asia, have been growing strongly, and the world upturn has been sharper than many anticipated. Between 1998 and 1999 world oil demand rose by 1.6 per cent to 74.8 million barrels a day, and it is anticipated that demand will have risen again this year by 0.8 million barrels a day. Between 1998 and 1999 OPEC output fell by 1.2 million barrels a day, and non-OPEC supply was constant.