With warnings from Nomura bank that oil prices are set to double if Libya and Algeria halt production, there is every likelihood that the crisis will derail any recovery. The Wall Street Journal reports that most economists say the price of Brent crude would have to hit $120 a barrel to stymie any recovery in the US. But if the price doubles to $220, as Nomura has warned, that will happen.
The International Energy Agency has warned that oil prices are now in the "danger zone" and threaten the global recovery. The IEA's chief economist Faith Birol says that the high prices will create inflationary pressures, forcing banks to raise interest rates.
Also, rising petrol prices will put a significant drain on consumer budgets which will reduce demand. Consumers will cut back on other purchases. That will stop any recovery.
The danger zone is looming large.
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