Analysis: Troubled euro zone states most at risk from high oil

Comments (2)
JaneT3 wrote:

I read an article by the economist Shaun Richards which raised the issue of the effect of high oil prices and went on to explain why it was very strong right now in the Euro’s periphery.

“Many countries are in an anti- boom right now

For countries in weak economic circumstances a high oil price hits them when they have less flexibility to adapt to it. If we look at how the US Energy Information Agency defines this we get the idea.

When the prices of petroleum products increase, consumers use more of their income to pay for oil-derived products, and their spending on other goods and services declines.

My point is that we have countries in Europe in particular where “spending on other goods and services” is either flat or declining. For example the UK has just revised her Gross Domestic Product figures this morning and they now show an economy which only grew by 0.7% in the last year and shrank in the last quarter by 0.2%. So there is much less flexibility than one might see in a boom. There must be no flexibility at all in Greece with an economy which shrank by around 7% over the last year or Portugal which shrank at 1.5% and is accelerating downwards. Here higher fuel prices will have to mean less consumption of something else.”

http://www.mindfulmoney.co.uk/wp/shaun-richards/why-the-current-rise-in-the-price-of-crude-oil-could-have-a-more-powerful-economic-effect-than-expected/

I thought at the time he was likely to be right and I now see others coming to the same conclusion six weeks later!

Apr 10, 2012 8:23am EDT  --  Report as abuse
fred5407 wrote:

I think the big mistake is to think that we can control Iran by sanctions. Another Obama and friends mistake. You can try to control other nations economy, but it always comes back to biting you where the “sun don’t shine”. I think that the meddling by Congress and Obama will cause a double dip depression and will cook the Democrats goose for the elections and maybe two years from now also.

Apr 10, 2012 3:34pm EDT  --  Report as abuse
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