The International Monetary Fund has released a report stating that the rising oil prices might lead to inflation and stunted growth in the economy of countries across the globe.
The report explained that the hike in the price of oil could lead to a repetition of what occurred in the 1970s when geopolitical tensions caused fossil fuel prices to spike.
The organisation disclosed this in a report titled ‘Lower oil reliance insulates the world from 1970s-style crude shock.’
The Washington-based lender said, “For some, rising oil prices may echo the 1970s when geopolitical tensions also caused fossil fuel prices to spike.
“Memories of the high inflation and slow growth that followed—known as stagflation—have fueled concerns about a possible repeat. Importantly, though, times have changed.”
The report stated further that some countries have been trying to combat the oil price increase with spare production capacity while others are making use of their petroleum reserve.
The IMF stated that Brent crude, the global oil benchmark, had risen to a seven-year high of about $100 before the Ukraine crisis pushed it above $130.
The IMF said, “Central banks, too, have changed since the 1970s. More are independent today, and the credibility of monetary policy has broadly strengthened over the intervening decades.
“We expect global growth to be close to the pre-pandemic average of 3.5 per cent, even after our April World Economic Outlook lowered projections, but it still could slow more than forecast, and inflation could turn out higher than expected.
“This may be most salient for parts of Europe, given their relatively higher reliance on Russian energy imports.”
