“Allianz Global” on why recovery could be a double-edged sword.
“Allianz Global” believes that the fragile recovery in the global economy means that there will be a significant lag between an increase in demand for oil and a corresponding increase in its supply.

With China recently becoming the largest auto market in the world and other emerging economies placing increasing pressure on supply, “Allianz Global” believes that double-digit oil prices will be a thing of the past by 2011.

Sources close to the Italy-based investment house have expressed concern that the rising price of oil could increase inflationary pressures in economies with weakening currencies at a time when their fragile recoveries can least accommodate higher interest rates to combat rising prices.

While the US Federal Reserve maintains its zero interest rate policy, other countries are forced to pay more to import oil as its price rises in dollar terms and this could derail the recovery.

“Allianz Global” analysts have reiterated their recommendation to clients to gain exposure to the bull market in crude oil by acquiring stock in oil explorers and producers which stand to do well from the increased price in the years going forward.