Commentary: Oil and the Economy

Between 2000 and 2003 OPEC maintained a target range for the price of oil of US$22–28 per barrel. In early September of this year the price of oil reached US$67 per barrel. Such a rapid change in the price of oil was not anticipated either by economic forecasters or by those involved in the industry. Indeed, about a year ago, with the price of oil just over US$40 per barrel, a senior oil company executive, said that the high prices were caused by short-term factors and that prices had reached their peak. As the rise of oil prices has continued, people's thoughts have inevitably turned to the two oil crises of 1973–4 and 1979–80.