IMF to discuss world defiance of expensive oil

Chandi Dharmaratne

PARIS, Sept 10, 2006 (AFP) – The “third oil shock”, as some have dubbed the tripling of oil prices since 2002, has been remarkably well-absorbed by the world economy, analysts say. Contrary to past experience, the sharp rise in prices has not sent the world tumbling into recession, revealing a number of key shifts in the past 40 years that explain the new-found resilience.

The subject of how growth has been sustained with the price of a barrel of oil hovering at about 70 dollars is to figure prominently at a meeting of the International Monetary Fund and World Bank in Singapore on September 19-20.

Meetings of the two institutions two years ago saw policymakers express reservations about the impact of 50-dollar oil on the world economy, with some even fearing a global slowdown.

With the world economy set to power into another year of high growth next year, albeit at a slightly slower pace than in 2006 according to forecasts, a number of factors have been cited to explain its vitality.

These include greater energy efficiency, lower dependency on oil as a power source, heightened competition between companies, improved central bank credibility, and China.

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