The impact of high oil prices is testing the international economy, says a signed article in People's Daily. The following is an excerpt.

"Rising" is a very appropriate word to describe the trend of the international crude oil price in 2007, In the crude oil market in New York, the price started to rise since this January and even got close to $100 per barrel, and it is still running at a high level. Considering the factors of inflation and US dollar depreciation, the international crude oil price in 2007 is as high as that during the oil crisis period in the 1970s.

Compared with the previous oil crisis, the world economy now has a stronger ability to resist the high oil price. However, the crisis will last longer than before since this round of oil price hikes is driven by demand. Although high oil prices cannot affect the world economy fundamentally, they have increased inflationary pressures and had a noticeable influence on the world economy.

In the short term, it will depreciate personal incomes and raise the price of goods. Due to the increasing expense of energy, consumers have to reduce non-energy consumption and personal savings. As a result, their confidence and demand would also be affected negatively. For enterprises, the oil price hike means rising costs and falling profits.

To meet the challenge of high oil prices, long-term countermeasures should naturally be energy saving and waste-reduction, as well as the seeking of alternative sources of energy.

Facing the impact of high oil prices, oil producing and consuming countries should hold rational talks and protect the stability of the oil market to reduce or eliminate the negative influence brought by high oil prices and reach a win-win situation.

(China Daily 12/29/2007 page4)