Owing to escalating worldwide use of and dependence on oil, it logically follows that its price greatly affects the global economy. An investigation of various national reactions to changes in oil prices along with select historical accounts permit a better understanding of the intimate relationship between oil prices and the global economy. Of particular interest are the macro-economic consequences that escalating oil prices present. Fatih Birol, in an article entitled 'Analysis of the Impact of High Oil Prices on the Global Economy' (2004), properly illustrates the connection between these two variables.

             As stated, global economic performance is largely determined by oil prices. It is not surprising that oil price surges affect various economies differently. Escalating oil prices lead to a general redistribution of income in that it is transferred from importing oil countries to exporting oil nations (Birol, 2004, 3). It is important to note, however, that although economic growth in importing oil countries during oil price hikes takes place, it has historically 'been less than the loss of economic growth in importing countries' (Birol, 2004, p.4). In other words, during oil price hikes, global net growth has always been negative. .

             For importing oil countries, the effects of rising oil prices on economic growth depend on several factors. First, 'the size of the shock, both in terms of the new real price of oil and the percentage increase in oil prices' (Roubini & Setser, 2004, p. 1) is an important determinant of the economic impact on these countries. Second, the speed with which oil prices rise greatly impacts importing oil economies; they better adjusted to slowly rising prices than those that escalate sharply. A third factor is the longevity of an oil shock; the longer the prices remain high, the more likely such conditions will negatively affect economic growth in importing oil nations.