Oil has reached today US$135 per barrel. My view is that high oil and other commodity prices are not a short-term phenomenon. They are here to stay and this represents a major structural shift in the World economy and in our way of living. Let me mention two effects of such shift.
Across the globe, over the next decade or so there will be a massive transfer of wealth from rich countries, such as European and North American countries, to poor, less developed countries whose economies are still largely dependent on agriculture and mines. These include the countries of Latin America, Africa and some Asian countries.
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Within each country, the story will be radically different: it is the poor who will be particularly hit. The poor spend a disproportionate share of their incomes on basic necessities of life, such as food and transportation. They are set to suffer the most from skyrocketing food and oil prices. As a result, poverty is going to increase in developed countries at an accelerated rate. Just watch it in Portugal.
Within each country, the story will be radically different: it is the poor who will be particularly hit. The poor spend a disproportionate share of their incomes on basic necessities of life, such as food and transportation. They are set to suffer the most from skyrocketing food and oil prices. As a result, poverty is going to increase in developed countries at an accelerated rate. Just watch it in Portugal.
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