There was good news in the oil markets recently when prices eased slightly as things in Iraq levelled out. Also there are suggestions that the US will release part of its strategic reserve to boost President Bush's re-election prospects and so reduce oil prices.

Unfortunately, the damage has probably already been done. And the galloping oil price rises of recent weeks may already have been enough to trim global growth next year. What's more, economist say that the UK is "within a whisker" of becoming a net oil importer for the first time in many years.

HSBC has been doing some work on the situation. North Sea oil peak production levels have fallen 20% in half a decade and there has been no significant new discoveries for around six years.

This run down will affect the balance of payments and government tax revenues. As a result of which HSBC reckons that the effect will be a move from a GDP surplus equivalent to 0.6% at the end of the millennium, to a deficit of perhaps roughly the same amount.

But, take heart, the financial wizards say "this is not the time to jump out of the window". Instead, all that is happening is that in the UK we are moving towards the same position as most of our western European cousins - in essence we are energy poor!"

So is the £10 gallon of petrol on the horizon?

(c)Andrew Leech
andy@buckshouse1.demon.co.uk
Bucks House Publishing