Oil prices could cause global recession : S&P Chief Economist

There was a dire warning today from one of the world's leading credit ratings agencies : an oil price shock could cause a major global recession, and financial markets aren't building in enough capacity to absorb risk. David Wyss is the chief economist at Standard & Poor's. He says that if there's a war in Iran that cuts off Middle East oil supplies, the price of crude could hit US$250 a barrel. David Wyss, visiting Sydney from New York City, spoke to Economics Correspondent Stephen Long :

STEPHEN LONG: How bad a recession are we talking about?

DAVID WYSS: My guess at that point would be on the order of the 1980-82 recession, with unemployment rates in the US climbing up towards ten per cent and you know, a couple of years of significantly negative real GDP.

STEPHEN LONG: How well placed are financial markets to deal with the kind of extra shock that we're talking about?

DAVID WYSS: If you're talking at $100 oil, I think financial markets are pretty well placed. At $250 though, that becomes a major problem and I think that's a problem for financial markets, not just the real economy, everything is in trouble.

(2006-08-05 18:47:47 SGT) [Energy] Permalink

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