Charlie Parker: Oil exporters hoarding cash means global stagflation

Historically the ratio of oil import revenue being spent has reduced. In the 1980s around two thirds of revenue was spent on goods. However, the current unrest in the Middle East could well accelerate this trend again as governments rush to calm social unrest with cold hard cash.

So we can target those businesses likely to benefit from that.

However, a little A-level economics reminds us that even though there are compelling investment themes in the 'oil bill' there is also one serious problem for the global economy. Namely, at the end of the day a substantial portion of cash is still being transferred into economies where people are more likely to save. This can only slow the global economy

Fels concludes: 'We do not believe there is a 'threshold' for either the oil price or the oil bill, a 'magic number' at which the global economy would roll over. Rather, climbing oil prices exert a more and more constricting effect on expansion by transferring increasingly larger chunks of income from oil importers to oil exporters. Therefore the larger the economy redistribution, the larger, all else equal, will be the demand destruction and the more the global economy will slow.'

Morgan Stanley believes that in bear case where the oil price stayed at $140 a barrel for the whole of 2010 and 2011 it would mean stagflation for the global economy.