Oil found itself all the way back up at $61#43; a barrel over the weekend.

Black gold has now fully regained the price losses seen during the first few weeks of this year.

Bad weather was the cause. With the Midwest knee deep in the white flaky stuff, Americans turned up their heating, and more of the black runny stuff was turned into carbon dioxide.

At $61.51, at the time of writing, oil is still $18 below the peak of last summer.

In terms of oil’s effect on inflation, it should be remembered that inflation is down to rising prices, not high prices. The fact that oil is well below the peak of eight months ago means that it is currently exerting a downward effect on inflation.

In the longer term, however, we have always questioned whether the rising price of oil was inflationary anyway. One-off price hikes do not usually lead to inflation, and since oil is a product we all use, it could be argued that the high price of oil was having a deflationary effect on the economy because it was making us feel worse off.


© Investment & Business News 2013