Oil Market is Changing - IMF

The International Monetary Fund has published its twice yearly assessment of the world economic outlook.

That means it is the season for worrying about oil prices again.

Of course it is not just the IMF that frets about oil.

But it has been a concern in several of the Fund's global economic health checks in recent years.

So far, the oil price has not done serious economic damage.

'Economic fallout'

The global economy is indeed growing more slowly that last year, and the IMF does hold the oil price partly responsible for what it calls a 'soft patch'.

Consumers and business are spending more on filling their cars and lorries, and on heating their homes, offices and factories.

In spite of that, the IMF's forecast is for pretty robust growth - 4.3% this year and next for the world.

This does not look like the 1970s or early 1980s, when sharp rises in oil prices were followed by recessions.

But there was a warning from the IMF's chief economist Raghuvan Rajan, that the oil market may now be changing in a way that increases the risk of economic fallout.

The main factor driving the oil price higher so far has been strong economic growth.

The US and China for example have needed increasing amounts of energy to fuel their expanding economies. Strong demand for oil has driven prices higher.

'Different world'

Increasingly, though Mr Rajan says "the demand driven price increase is giving way to supply side effects".

He referred to the disruption to oil supplies caused by hurricane Katrina in the southern US and the possibility of further damage from hurricane Rita.

We live in a different world, he says.

There is not much spare capacity in the industry - among crude oil producers and among refiners who turn crude into products like petrol or aviation fuel that people can use.

It means that Mr Rajan is concerned that the oil price "might not have the same benign effect" that it has had up to now.

The oil crises of the 1970s and 1980s were caused by supply disruptions - following political developments and conflict in the Middle-East.

Mr Rajan sees us in a world where supply disruptions are again possible just because there is so little slack in the industry.

He is not predicting a repeat of those earlier crises. But he is clearly keeping a wary eye on the oil market.