The price of oil

The Economist published an article last week entitled Bubbling up that presents a pretty gloomy outlook for the world economy.

The price of oil, at just under US$40 a barrel, is now almost double what it was a year ago. The uncertainty surrounding George Dubya’s war with Iraq is a factor, but as The Economist points out, three other factors also come into in play: (i) the coldest winter in the northern hemisphere for yonks causing demand for oil to rise quite sharply; (ii) supply constraints outside of the Middle East (a lengthy strike in Venezuela has just concluded), and (iii) – wait for it – the big drop in US oil stocks – now at their lowest level for years. Now repeat after me … “the Iraq conflict is not about oil”.