Oil prices in the next decade


An influential working paper was released by IMF on The Future of Oil, and “its point forecast is for a near doubling of the real price of oil over the coming decade”. This is really bad news for the world economy, but the debate on its effects still languishes as economists and policy makers are all caught in the passionate discussion on the financial crisis and how to save banks, national debts and currencies. Though, the oil price dynamics should deserve more attention since its negative effects may be wide and heavy on recession and global trade. There is robust evidence that growth is hampered and international trade flows are lower when oil prices fluctuate significantly (as for example demonstrated by Chen and Hsu in the paper “Reverse globalization: Does high oil price volatility discourage international trade?” -Department of Economics of National Taiwan University, available from Sciencedirect.com).