Be frugal or be bankrupt

2011-04-09 12:56

The International Monetary Fund has ­painted a grim picture of where the oil price is going.

The institution reckons that the world has ­entered a period of steep increases in the oil price, where demand for the commodity outstrips ­supply.

It has predicted that the oil price could surge to the record high of $148 a barrel it hit in 2008, when consumers of the black gold found themselves ­confronted with shock.

Inflation also surged at those levels, forcing central banks to significantly hike interest rates. As a result, the global economy went into ­recession while job losses mounted.

Banks were forced to repossess houses and cars from cash-strapped consumers, who could no longer afford to repay their debts.

Already, the oil price is marching north and this week it climbed above $120 a barrel for the first time since 2008.

The oil-price onslaught has not been triggered by demand, but by the political unrest in the ­oil-producing Middle East and North Africa.

The oil price is likely to increase even further amid reports that the fighting in Libya has ­damaged that country’s oil fields.

Given these developments, South African ­consumers must tighten their belts as inflation and interest rates are bound to hit the roof.

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