Tuesday, 29 March 2011

Saudis and Oil Key to Global Economy

THE SYDNEY MORNING HERALD: The fate of the world's economy and financial markets lies with Saudi Arabia's political stability and the price of oil over the next three months.

That's according to independent economist David Hale, who says an escalation of friction between oil producers Saudi Arabia and Bahrain could tip the world back into recession.

Mr Hale's opinion is backed by Magellan Financial Group's chief executive Hamish Douglass, who says a major conflict involving major oil producers could have the oil price skyrocket by $US200 a barrel.

Saudi Arabia's intervention in Bahrain two weeks ago to quell a civil uprising polarised, rather than stabilised, the situation that had since quietened down, said Mr Hale, who is global economic adviser to the Commonwealth Bank of Australia.

"I think it was probably too pre-emptive and probably destructive," he told AAP in an interview in Melbourne.

"I think the critical issue of a tipping point is Saudi Arabia and political stability.

"If that's jeopardised, that could send the oil price up (by) $US50 a barrel, $US100 a barrel. That would tip us into a new global recession." » | Alison Bell | AAP | Tuesday, March 29, 2011