Oil and the Economy

IMF Sees Oil Prices Staying High

• Production constraints limiting increase in supply of oil


• Growth in emerging markets, particularly China, boosting demand

• Policies should aim at easing economies’ adjustment to increased oil scarcity
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Oil  prices are likely to remain high for the foreseeable future and IMF economists say that governments should be looking to back sustainable alternative sources of energy.
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Threats to oil supplies, including geopolitical risks, imply that oil scarcity could be more severe and may materialize in large and abrupt changes. The negative global growth effects would be correspondingly larger

The fundamental; supply and demand.   Scarcity oil the demand is much greater than supply. Here Reuters is also  "There is a risk that the tensions between demand and supply trends could intensify again and prices could rise rapidly."
 
The fact is; If this Libya crisis dragging on, the supply shock we have seen from the history, credit to the tensions in the Oil producing Libya Middle East is potentially fatal for the global economy, higher fuel prices to lead to a threat to the fragile recovery. We also worry this Middle East crisis, about the another fact, as we have seen through the world financial crisis, about a prolonged oil price rise, according to the IMF – it could cause the sort of financial instability that was responsible for triggering the another financial crisis.

Also in a period of rising prices, oil exporting countries,  are very happy about their fat surpluses, while importers(most of the countries are) will see  their deficits rise higher. That is imbalances: the capital flows they generate, that is the primary sources of instability in the global economy which we have seen,  that is we should worry about as the last crisis recovery still fragile.

YSK-W