World at US$139 per barrel

So we are at US$139/bbl now and there are enough speculation on the futures market that US$200/bbl can be a distinctive possibility by year end. What is the world coming to when oil becomes so pricey both in nominal and real terms? The impacts can definitely be wide and long-lasting. Its effects on politics can effectively usher in the next era of economical trends that may well define the end of this decade and the beginning of the next - protectionism.

Reports and news worldwide seemed to indicate that protectionistic governments are gradually finding their way back to power. High oil prices biting into the pockets of every single agent in an economy, is getting the people to push for more socialistic policies. Political parties that stick by the slogans of "keeping jobs in the country" "slap taxes on companies that shed jobs and move overseas" and "bring back fuel subsidies" are gaining popularity in turbulent times. They are imposing export quotas rather than letting the global market adjust demand and supply. They are bankrupting the nation with fuel subsidies rather than taking the painful steps of gradual accustomisation to high inflation. They are re-introducing labour immobilty rather than pushing mobility (mobility of labour can prevent the devastating impacts of wage-price spirals).

If this trend is to eventually happen, we may see stronger regionalisation rather than globalisation. Winners will be the eastern european nations who are admitted to the EU. They will take over China to become EU's production house. Production giants like China need to rely more on domestic and regional demand. The losers will be low cost producers that do not have a big domestic economy to rely on.