The spike in the oil price to nearly $120 a barrel is a hint of what might lie ahead if unrest spreads from North Africa to the major oil-producing countries in the Middle East Libya is not a particularly important oil producer. Ranked 19th in the world and accounting for about 2pc of global output, its production is quite easily replaceable. Saudi Arabia could fill the gap twice over with its existing spare capacity. The real concern, however, is contagion. Saudi Arabia itself is not immune, evidenced by the financial support measures worth $36bn announced last week So far, investment markets appear to be dismissing the possibility that we are facing another 1970s-style oil price shock. In the context of the significant rise in markets since last summer, the pull-back last week was unexceptional. But the speed with which the oil price spiked shows how pull-back last week was unexceptional. But the speed with which the oil price spiked shows how quickly the backdrop might become less benign.
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