Rising oil prices widens the gap between rich and poor countries

Since the American invasion of Iraq in March 2003, the world saw a constantly and unprecedented oil prices which climbed last Wednesday, for the first time in history, at 78,77 dollars a barrel. This high price affects the global economy and the direction of wealth.

If the high prices of oil does not destabilize the economy of industrialized countries and allows producing countries to make huge gains, it represents a huge pressure on the economy in developing countries which import energy.

In this context, Francis Perrin, editor of "Oil and Arab petroleum" magazine, explains that rich countries were successfully able to adapt to the significant rise in oil prices over the past four years. "If the price exceeds 80 dollars per barrel, this will represent a psychological barrier on the prospects of investment in the world".

For its part, Manuchehr Takin, an expert at the Center for Global Energy Studies of the iranian Ministry of Petroleum, said that industrialized countries are now less dependent on oil, which was not the case thirty years ago. "Following the oil shocks of 70's and 80's, these countries have worked on diversifing their energy sources, and concentrating their efforts on developing nuclear energy", he added.

But Takin believes that rising oil prices, which has been multiplied by three in 4 years, will slow growth and contribute to higher inflation.

It seems that rising oil prices will continue, in medium term, because in the last few years the emerging countries, specially China and India, had increased their demand on oil.

Additionally, the high rate of growth of the global economy, which exceeds production capacity, is puts pressure on prices and prevent them to go back to levels existed five years ago when the price of oil did not exceed the 25 dollars per barrel.

What is remarkable is that despite the significant increase in the price of black gold, the International Monetary Fund (IMF) has revised upward its expectations for the global growth rate in 2007 and 2008. He estimated that the rate would reach 5,2% thanks to the performance of the economy in the emerging countries, specially China. At the same time, the IMF warned that high oil prices posed a threat to the global economy, but has not expressed great concern about this.

Philip Chalman, professor of economics at the University of "Paris Dauphine" and specialist in the affairs of raw materials, agrees with the fact that high oil prices will not affect the global economy, led by industrialized countries.

It is certain that the gains made by oil producing countries, which are mostly developing countries like Venezuela, Algeria and Libya, will lead to increase the purchasing power in these countries. Also, the spending of those countries for infrastructure development will increase, which will benefit the advanced countries that have the know-how.

But the disaster resulting from high oil prices lies in developing countries which import energy. These countries have suffered from the sharp increase in their energy bill and, consequently, from the increasing trade deficit, which constitutes an obstacle in its fight against poverty.

Calude Mandel, director of the International Energy Agency which defends the interests of energy's consumers, said that the situation is a terrible disaster for the poorest countries. "Oil prices in these countries are subsidized by the state, which is a pressure on the government budget", he added.

Mandel explained that the cost of this subsidy in the budget of poor countries is five times more than the debts of these countries canceled by the Eight major industrialized countries (G8).

In its latest report on economic prospects in Africa, the Organization for Economic Cooperation and Development said that the inflation rate has exceeded the barrier of 10% in African countries which import oil due to high prices.

The Organization said that the development of new sources of energy such as bioenergy, which are produced from grain, will increase the crisis in some developing countries because it will put pressure on food prices and, therefore, this can lead to famine in the future.