Johannesburg — Petrol prices will rise later this week, but not by nearly as much as might have been expected given the past month's surge in the dollar price of crude oil.

At just under 65 a barrel, oil prices are now at almost double the trough reached last year after the market collapse sparked by the bursting of the global commodities bubble. The crude market has gained almost a third in the past month alone, apparently on increased confidence in the sustainability of the world economy's tentative recovery.

Analysts say Saudi Arabia's forecast last week, that oil prices could reach 75 a barrel later this year, also represents a distinct policy shift from the world's largest oil producer, which has until recently been hinting that it would be happy with a lower price to help get the world economy back on its feet.

Rather than continuing to cut production quotas to support oil prices, oil producers' cartel Opec now appears ready to sit back and allow increased demand to lift prices.

South African fuel consumers have been shielded from the full effect of the rapid oil-price rise by the strengthening rand, which has been boosted by an inflow of foreign capital prompted by the self-same rise in investor confidence that has stimulated the crude market.

However, as welcome as this serendipitous combination of market fluctuations may be to domestic consumers and businesses still struggling to service debt despite the spate of interest rate cuts, there is a familiarity to the pattern that should set warning lights flashing.

Rand strength also protected SA from the worst of the energy price bubble, when oil prices spiked to close to 150 a barrel, but the consequences were not all positive. Artificially low imported inflation played a significant role in allowing the Reserve Bank to keep interest rates lower for longer without exceeding its inflation target band, encouraging the consumer boom and debt accumulation that is putting the real economy under pressure today.

As recently as last week, market analysts were expressing the hope that the rand's comeback against the dollar would continue so the monetary policy committee could provide further relief at its next meeting.

While there is a legitimate argument that rapidly slowing economic growth justifies further cuts, even if this turns out to be inflationary, it would be shortsighted to ignore the fallout in other areas of the economy, not least the effect rand strength combined with suppressed international demand for consumer goods is having on SA's exporters, the country's manufacturing base and employment levels.

Maintained for any length of time, a strong rand and low interest rates will encourage a superficial economic recovery led by consumption of imported goods, rather than the investment- led recovery that is needed to create jobs.

This dilemma is a reflection of the threat the world as a whole faces as it contemplates the post credit crunch future.

While there are tentative signs that the massive liquidity injection is starting to have the desired effect, there is a danger that the cure could be as harmful as the original ailment.

Little consideration has been given to the long-term implications of so much money being created out of nowhere and pumped into the system. One of these could already be manifesting in the recent oil price surge and there is a real risk that any nascent global economic recovery will be nipped in the bud if energy prices rise too quickly.

That would not be of concern in a market governed by normal supply and demand pressures, but the oil market is already skewed by Opec's dominance and the recent oil price bubble proved that matters can quickly spin out of control when speculators get involved. Since actual demand for oil is still falling, it is apparent that the recent price increase is based on traders pre-empting a world economic recovery -- and expected energy shortages -- rather than a change in market fundamentals.

With many of the supply-side factors behind last year's record oil price still in place, the stage is being set for another bubble, and a repeat of the economic boom and bust cycle.

Little consideration has been given to the long- term implications of so much money being created and pumped into the system