This week, the price of oil topped $30 a barrel for the first time in nearly a decade. Crude prices have been climbing for a year, and there is concern that they may rise still further. That has triggered worries about inflation, which could hurt the global economy. While concern is justified, fear is not. The world is not facing an oil shortage, but policymakers need to keep an eye on oil prices to ensure that they do not dampen the prospects for growth.
A year ago, oil cost about $11 a barrel. Prices have nearly tripled since then. Comments earlier this week by U.S. President Bill Clinton seem to have capped the most recent surge, but they could begin to climb again.
Prices are rising for two simple reasons: supply and demand. Economies are growing again. The International Monetary Fund projects 3 percent growth for 1999 and 3.5 percent this year. The Asian Development Bank estimates that developing economies in Asia should post 5.7 percent growth this year. That means the demand for oil, which averaged 75.5 million barrels per day in 1999, will grow to 77.3 million bpd a day this year.