Surging oil prices are beginning to cause fears of a new oil shock that could tip the US economy back into recession.
"It now appears as though the probability of a 'double dip' is increasing . . . it is increasingly difficult to rule out a recession caused by an old-fashioned oil shock," Merrill Lynch chief US strategist Mr Richard Bernstein said in a report yesterday.
It was harder now to rule out such a scenario, with rising energy prices already starting to constrain consumer purchasing power, the economist said.
Many analysts, including US Federal Reserve chairman Mr Alan Greenspan, have said high oil prices alone are insufficient to trigger recession, especially since oil plays a diminishing role in the economy.
But a recent surge in prices has led some economists to consider the threat seriously. Crude oil prices climbed to two-year highs on Friday, before easing off a little yesterday.
US light crude dipped three cents to $34.45 a barrel, extending yesterday's 64-cent fall in New York. Crude is less than $1 shy of a 26-month high struck yesterday.
AFP