Oil price prompts global recession fears

Oil hit $50 a barrel in Asian trade today, reaching that threshold for a second straight day even though Saudi Arabia vowed to boost production capacity to try pushing the price lower.

After hovering just below $50 through the Asian morning on the New York Mercantile Exchange’s after-hours dealing system, crude to be delivered in November inched up around midday and again touched the milestone it first attained yesterday.

That was a gain of 10 cents from the close of $49.90 during the regular trading session in New York yesterday. Crude had peaked at $50.47 in after-hours trade yesterday.

The price spike has set off worries among some economists that expensive energy could set off a global recession if the market doesn’t come down.

Oil now costs around 75% more than it did a year ago but when adjusted for inflation, still remains around $30 below the level reached in 1981.

US Treasury Secretary John Snow said yesterday that the spike in global oil prices will be one of the key issues to be tackled at a meeting of the Group of Seven industrialised nations in Washington this week.

OPEC’s efforts to bring prices to more moderate levels have failed, but giant producer Saudi Arabia said yesterday that it would boost production capacity by 15% to try to stabilise the market.