A sign at a Shell petrol station in London in this April 18, 2001 file photo. Shell shareholders ended a century of history yesterday when they voted to scrap the group's dual-listed structure. Shell hopes the unification of its Dutch and British parent companies will help streamline its management structure, whose complexity was blamed for a damaging reserves overbooking scandal last year. - REUTERS
PARIS (Reuters):
WHEN IRAQI tanks thundered into Kuwait in August 1990, oil prices doubled, car sales tumbled, recession hit the United States, and crude costs retreated within a year as a result of a slump in demand.
As oil tops US$60 a barrel, people wonder if a rerun is on the cards - first, whether recession will strike again, and second, whether that is the only way prices will abate.
The answer from economists is 'probably not' on prospects of recession because oil is still relatively cheap by comparison to the extremes seen in recent decades and the most industrialised nations are generally more efficient, and thus resilient.
SMOOTHER HIKE
Moreover, economists say the alarm over oil's latest record - nearly US$61 - tends to hide the fact that the recent price trends are less abrupt than in 1990 or previous crises when Arab nations turned off the taps. That gives more time to adapt.
The Islamic revolution and the Iran-Iraq war led to a surge in prices from the equivalent in today's terms of US$40 a barrel to US$95 - and two recessions knocked oil demand to 55 million barrels a day in 1983 from 63 million a day in 1979.
Most industrialised economies learned from the 1970s and now need only half as much oil to produce the same amount of goods, but the world produces more goods and needs 80 million barrels a day now, when it needed just 20 million in 1960.
In terms of growth, OECD experts reckon a US$10 rise per barrel knocks close to half a percentage point off world economic output the year after, a purely statistical simulation that many believe is a gross understatement.
Last month, before the latest record of nearly $61 reached on Monday, U.S. Air Transport Association chief James May said U.S. airlines were losing $17,000 a minute due to fuel bills and that he expected more job losses in an already ailing industry.
In Europe, where the dollar's slide last year helped make oil more affordable because it is paid for in dollars, British Airways and Virgin were joined on Monday by Lufthansa's cargo business in announcing fare rises to offset fuel costs.
