Oil price impact on economy limited

Oil price rises are likely to have little impact on the Swiss economy Keystone

The impact of the rise in oil prices on economic growth and inflation is likely to be minimal, according to a study released on Wednesday by the Swiss economics ministry.

The ministry bases the prediction on a forecast drop in oil prices in the medium term. It says prices will come down because it is not in the interests of oil exporting countries to provoke a recession in importing countries.

The price of crude oil is currently more than three times higher than a year ago, but the economics ministry expects it to start falling again in the fourth quarter of this year, partly as a result of last week’s decision by oil exporting countries to boost production in October.

It expects the price of a barrel of crude to remain above the $30 mark until early next year, and to drop to between $27 and $28 by the end of 2001.

The additional profits made by oil companies as a result of the high prices will lead to more spending on the search for new reserves, which should lead to a rise in supply in the longer term, says the report.

However, the economics ministry sees little change in the immediate future.

The decision by hauliers this week to raise their prices to offset the cost of petrol will make transport more expensive and further push up inflation.

In spite of this, the ministry argues that the longer-term effect on inflation will be limited.

swissinfo with agencies