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Politics : Idea Of The Day

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To: IQBAL LATIF who wrote (49148)	9/24/2005 6:41:23 PM
From: IQBAL LATIF	of 50167

Impact of Oil on growth..English press today.. Growth was faltering, said Mr Brown, because oil prices were spiking as badly as in the early 1970s: the world, he said, has to come to terms “with an oil price shock as big as the 1970s”. This is untrue: oil prices quadrupled almost overnight in 1973; they have taken several years to triple this time and in real terms are still well below 1973 levels. The present oil shock is also nothing like as damaging as it was in the 1970s because modern, service-based Western economies are less dependent on oil; and Great Britain is a special case. Because of North Sea oil, the country is still just about self-sufficient in oil, making it much less affected on a macroeconomic level than countries that are net oil importers, such as the United States. Every extra pound that consumers are forced to spend on oil – and hence that they cannot spend on other things – ends up in the pockets of the North Sea oil companies. High oil prices cut non-oil gross domestic product (GDP) but lead to an equal increase in overall GDP. So the UK remains largely insulated at current oil prices, even though other European countries have seen 0.5 percentage points or so chopped off their growth because of the oil price spike.

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