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Oil on troubled

The oil price fell around $4 yesterday, settling somewhere between $63 and $66.5 a barrel. It was spluttering around the same at the time of writing after hitting $70 early in the week.

What does this tell us? The price has largely reflected the movements of the major stock markets. The rally in the FTSE 100 for a record-equalling 11 consecutive days, up to Tuesday, encouraged a belief that economic recovery is around the corner - flying in the face of figures showing a deeper than expected recession in the UK. Oil rose alongside.

That suggests a real recovery - and not just hope of one - may trigger at least as much and probably something more.

The real point is that $63-$70 is an unusually high price for oil outside of last year's price spiral and in the deepest global recession for decades. In fact, it is extraordinary - and sets the baseline from which the price will surely increase with any pick-up in global GDP.

If that happens alongside the kind of marginal recovery optimists predict for the UK - perhaps 0.5% growth next year, which amounts to stagnation - and no real change in the value of sterling, it spells more pain for the travel industry.

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This page contains a single entry from the blog posted on July 30, 2009 2:52 PM.

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