While the Bush Administration dismissed the risk to the world economy of a war against Iraq, the president of the World Bank, Jim Wolfensohn, said that the impact of a higher oil price could be "quite significant".
"Very broadly, if you have a $US10 per barrel price increase, you get an impact in something short of half a per cent worldwide on gross economic activity," Mr Wolfensohn said in a television interview.
The price of oil was about $US24 a barrel (bbl) in June before US president George W Bush intensified his anti-Iraq rhetoric, which sent the price of crude to around $US30 bbl, where is it currently trading.
The IMF, meanwhile, estimated in its annual world economic outlook that a $US5 rise in oil price, if sustained for a year, would cut global growth by 0.3 percentage points. A sustained spike in the oil price by $US15, however, would cut world output by 1 percentage point, the fund said.
The fund's current forecast for world growth next year is 3.7 per cent.
The IMF said that the growth forgone would represent about a quarter of global growth or about $US400 billion in monetary terms. The fund went on to warn of the possibility of a chain reaction from a war in Iraq. "It would increase the likelihood of other risks to growth occurring and exacerbate their impact," the IMF said.
Crude is currently trading at around $US30.80 a barrel, up 0.4 cents on yesterday's trading. This reversed losses recorded late last week because of the weakening Cyclone Isadore in the Carribean. However two new storms in the Carribean have took up where Isadore left off, with resultant supply concerns.
