If Oil Prices Continue To Stay High &Nbsp, Or Stop The Global Economic Recovery.

The recovery of the global economy is improving but not stable, and soaring oil prices are reaching the level of possible termination of this process, but the possibility of a new recession or even stagflation may be minimal.

If oil prices continue to rise, it will rapidly increase pressure on central banks to tighten monetary policy.

And the direct impact of tightening policy is to extract some liquidity that promotes economic recovery.

However, the impact on different countries and regions varies, depending on their potential economic strength, and whether they are oil producing countries.

At present, few policymakers and analysts feel terrified.

The jump in oil prices is attributable to Libya's turmoil and wider supply disruptions, but has nothing to do with the fundamentals of the economy.

But the price level is high enough to at least make big trouble for the global economy.

Brent crude traded on a $115 a barrel Thursday, hitting its highest level since August 2008, and US crude oil futures also stood at $100.

The bloody riots in Libya have led to over 1/4 reduction in oil output in the country. Worries about the possible spread of political turmoil to other oil producing countries such as Saudi Arabia are the drivers of rising oil prices.

The Brandt crude futures contract touched $120 a barrel during the session, and Deutsche Bank said it was the turning point for global economic growth.

"When the price reaches $120 per barrel, oil is in the world.

According to Reuters market analyst Wang Tao, technical analysis shows that oil prices may be pierced by the 2008 high this year, approaching 160 US dollars per barrel.

* * the persistence of rising oil prices * *

A frequently cited rule of thumb is that oil prices rise by 10 US dollars every time, which will reduce the global GDP growth by 0.5 percentage points.

By this measure, the two recession caused by oil prices is still far away from us.

The Brandt crude will reach about $190 a barrel, which will lead to a global contraction of the global economy.

There are rules and regulations.

For example, oil prices soared in 2005, but the economy was booming at that time.

The real key lies in the sustainability of high oil prices.

Charles Robertson, chief analyst at Renaissance Capital, estimates that the average annual oil price is more than $150, similar to that of Iran after the 1979 revolution.

This pushed the share of oil to GDP to nearly 8%, higher than the level that allowed oil prices to start hitting global economic growth.

But Robertson says the world can respond to a brief jump in oil prices, which only increases oil's impact on GDP to 5%.

Meanwhile, Macquarie Bank analysts calculated that

And the resistance of the people in Libya alone may not be enough to make that happen.

What many investors and analysts are really worried about is that the stability of the Arabia world has been destroyed in a wider area, especially the possibility of Saudi Arabia being dragged down.

For example, Goldman Sachs's comments partly stimulated the recent surge in oil prices.

The company said there was concern that the turmoil in Libya could spread to other oil producing countries, and that further disruption of oil production could lead to severe oil shortages and the need for rationing. The market is responding to this concern.

If Saudi Arabia succumb to a serious anti government movement, all conjectures will vanish.

The largest producer of oil in the OPEC is holding more than 1/5 of its global oil reserves.

* * inflation * * *

Even if the price is relatively limited, any sustained rise in oil price will increase the inflationary pressure that has already been heating up, thus tightening monetary policy and creating different types of problems all over the world.

China's rapidly growing Asian economies are already struggling to cope with rising food prices and need to prevent the economy from overheating.

Deng Yusong, a market researcher at the State Council's development research center, told the news network that the impact of rising oil prices on consumer price index (CPI) is relatively small, but the impact on the producer price index (PPI) will be relatively deep.

Elsewhere, higher oil prices may disrupt some of the recovery measures that Western officials are struggling to make.

There have been calls for the British government to halt the call for oil tax.

The British government has worked out a plan to curb the deficit. Oil tax is one of its sources of income.

European Central Bank officials are increasingly tough on inflation, despite the weak growth of the non core member economies in the region.

At the same time, high oil prices have no advantage in employment in the United States.

Employment continues to drag on other areas of recovery and directly affect the most important consumer boom.

According to the analysis of Fathom Consulting, oil shock in the developed countries has the biggest inflationary burden on the United States.

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The consultancy calculates that the oil price of $120 will increase inflation in the UK and Europe by about 0.5 percentage points, while the US inflation rate will increase by more than 1.5 percentage points, because the United States has greater consumption of oil and lower energy taxes.

The oil crisis in 70s caused price increases, and global economic growth was affected by stagnation and stagflation.

The probability of such scene reappearance is very low, but it is not as obscure as it was a few weeks ago.