Oil prices hit record highs yesterday – US light crude climbed close to $45 a barrel while London prices shot up to $41, the highest levels in 21 years – and throwing markets into turmoil and creating concern and uncertainty for governments worldwide. To be sure, this is not like the oil shocks that hit markets in the early 1970s and 1980s, which caused serious damage to the economies of the United States, Europe, Japan and many other countries. That said, when inflation is taken into account, $40 today is worth much less than in 1980. In addition, the increase in oil prices has been quite gradual, which has given most developed economies time to adjust to the worst of the fallout. Nevertheless, experts have warned about the danger of new and abrupt hikes in oil prices. Finally, we should not disregard the fact that European economies are now less dependent on oil than they were three decades ago. Despite these reassuring factors, the wider consequences of soaring world oil prices should be neither neglected nor underestimated. Oil is not just a vital commodity, supplies are less flexible than they once were. For the first time in OPEC history, the oil-producing countries have announced that, because of high demand, they can only increase oil supplies by up to 1 million barrels per day down from 4 million barrels in previous decades. The situation is a delicate one, and the Greek government will have to monitor developments continually. This must take place on two levels. The government must keep an eye on the effect on domestic prices should the oil market continue to hover at current levels. In fact many experts fear that prices could spike up to $50 or even higher. The conservative leadership must take all the necessary measures to pre-empt negative consequences at home; there is still some time before the reverberations make themselves felt. On a second front, the Greek government must revive its ties with the oil-producing states. A warm relationship with those countries would be very helpful in the event of a future oil crisis. At the time of the two previous oil crises, Greece was on very good terms with the Arab world. The relationship, however, was snubbed by the now-departed Socialist government of Costas Simitis. Karamanlis’s government should engage in some bridge building before we pay the price of this neglect. In any case, the global surge in oil prices threatens to put an additional strain on the Greek economy, and this alone should be enough to mobilize the government into action.