Is Oil the Next Greece?

Christine Lagarde, managing director of the International Monetary Fund (IMF), said yesterday that the threat to the euro and the eurozone has been met for the time being and that the next battle to be waged in the continuing recovery of the global economy will be over the high price of oil:

The rising price of oil is becoming a threat to global growth. And, …there is a growing risk that activity in emerging economies will slow over the medium term.

While this might sound obvious the salient point here is that any threat to emerging economies is far worse than high energy prices in the world’s developed economies. Emerging economies are growing much faster than developed ones and if skyrocketing energy prices aren’t moderated, this faster growth will stop and then the global economy will really be in a fix.

According to MarketWatch, Lagarde noted that concerns about oil prices are “either supply-driven or come from geopolitical forces” and that governments need to be prepared to deal with either one.

Paul Ausick