Oil prices threaten US economic recovery says WSJ

The Wall Street Journal (WSJ) reported on Monday that high oil prices are threatening to slow down US economic recovery.

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By  Massoud Derhally Published  August 26, 2002

The Wall Street Journal (WSJ) reported on Monday that high oil prices are threatening to slow down US economic recovery.

The paper said that oil prices, which reached $30.11 last week, and “fears of a U.S.-Iraq war are threatening to impede a U.S. economic recovery.”

Assurances by the Organisation of Petroleum Exporting Countries (OPEC) and Saudi Arabia about making up for oil supply shortfalls that might result from a US -Iraq war have done little in calming the market.

OPEC has a spare capacity, most of it in Saudi Arabia, of about six million barrels a day that it could put into the market.

However, the organisation is uneasy about increasing production quotas, even though demand rises as winter nears.

An OPEC official however told the paper that he did not think high prices were a consequence of fundamentals, but of uncertainty about a US invasion of Iraq.

WSJ said that Goldman Sachs estimates “every sustained dollar increase in oil prices amounts to a $5 billion transfer of income from American households to oil producers.”

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