US economy hits the Oil breaker

April 30, 2005
(CoolAvenues News Wire)

Continued high oil prices seem to have hit back at US economy as it grew at the rate of 3.1% in the first quarter, which is the slowest in last two years and is well below the expected rate of 3.5% forecasted by economists, and below the growth rate of last quarter, as the growth attained by US economy in the last quarter of 2004 (Oct - Dec 2004), was 3.8%.

It seems that continuing high oil prices are leading to scaling down of expenditure and softening of consumer sentiments. Crude prices at present are hovering around $50 per barrel and have shot to $57.27 per barrel earlier and are still more than 40% higher compared to previous year.

Prior to the news of US slowdown, France had also reported drastic fall in industrial output in Feb'05 due to rising oil prices.

It seems that policy of Bush administration on oil has backfired, as US along with UK, invaded Iraq last year to secure its energy supplies and ward of any future energy crisis, since Iraq has one of the largest Oil reserves in the world. However, the crude oil prices, which were trading below $35 at that point of time have shot to $50 in post-Iraq occupation scenario, as US occupation has not gone as per the expected plan. The existing facilities in Iraq are facing continued challenges from Iraqi rebels while no new supply has been added.

Concluded.

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