The Surge in Oil Prices
Is a New Oil Crisis Looming?
SWP Comment 2004/C 34, 15.11.2004, 8 Pages Research AreasIs a New Oil Crisis Looming?
SWP Comment 2004/C 34, 15.11.2004, 8 Pages Research AreasOil prices have repeatedly hit new record highs in recent weeks. Since early October, oil has regularly traded for over $50 per barrel in New York. This trend, however, is no reason to conjure up fears of a new oil crisis comparable with those of the 1970s. Western industrialized countries have since changed fundamentally, and their economies are far less dependent on oil. Those to suffer most from the high price of oil will be developing countries that have little or no oil but instead have high foreign debts and severe trade deficits. The increasingly expressed view that the current price of oil marks the beginning of the end of oil does not stand up to scrutiny. In fact, it is doubtful that this surge in oil prices will last for long. It could well be that current oil prices are but another spike caused by oil-market volatility, which has risen sharply in recent years and discouraged investment in additional production capacity.