Magic Statistics

Based on the evidence of the past few years, the answer to that question has to be no. The price of oil is currently around US$60 per barrel, triple the level of three years ago; and yet world economic growth has increased and is forecast to remain high for the next two years.

Credit Suisse First Boston’s latest global economics snapshot puts world growth at 4.8% this year, even higher than 2005’s strong 4.5% and almost on a par with the 5.1% achieved in 2004. It has pencilled in 4.5% for 2007. For comparison, global growth over the 2001-3 period — before the big oil-price rise — averaged 3%.

Because of this, Times of London columnist David Smith believes that recent oil price hikes are driven by demand increases, not supply constraints. Oil prices have risen because growing economies demand more energy. Growing economies also have the resilience needed to adjust to higher prices for inputs, such as oil and other commodities.

Despite the efforts of Al-Qaeda, Nigerian militants, the Iranian government, and continued supply disruptions in Iraq, this oil-price hike is essentially a demand shock.

Higher prices, in other words, are mainly a product of strongly rising demand and, as such, can be distinguished from the supply shocks of the past. If economies have enough momentum, which they appear to have, they will shrug off high oil prices.

If this is true, and I think the evidence is persuasive, then Iranian President Ahmadinejad's dream of waging economic warfare on the West by organising the Muslim oil states and threatening to shut off supply is illusory.

The headline on this Telegraph story says, "How we duped the West", by Iran's nuclear negotiator; but I think my headline more accurately reflects its content. Hassan Rowhani, the man who for two years led Iran's nuclear negotiations, has detailed how Iran advanced its secret nuclear programme under cover of discussions with Britain, France, and Germany.

He boasted that while talks were taking place in Teheran, Iran was able to complete the installation of equipment for conversion of yellowcake - a key stage in the nuclear fuel process - at its Isfahan plant but at the same time convince European diplomats that nothing was afoot.

"From the outset, the Americans kept telling the Europeans, 'The Iranians are lying and deceiving you and they have not told you everything.' The Europeans used to respond, 'We trust them'," he said.

Obviously, the Americans were right on that one. Iran has made the Europeans look like fools.