The global sub-prime rate crisis which exploded in the banking sector last August has continued to chip away at consumer confidence, and worse yet, truly sicken global bankers and frighten stock markets from New York to Tokyo. It did not take an economist to foresee that often reckless bank loans and those making them would sooner or later cause the financial tumult we find ourselves in. And this crisis could certainly worsen. Equally there’s the dangerous decline in value of the U.S. Dollar!

Yet another deeper drag on development remains high petroleum prices, which have served over the past few years to temper growth and trigger inflation. In the long run I feel oil prices remain the lurking iceberg in the water. High energy prices have been pushed by supply (OPEC keeping the supply relatively low) and demand, impressive economic growth in the United States, Mainland China, and the European Union.

The mostly Middle Eastern producer OPEC cartel while buoyed by high petroleum revenues, actually fears that such prices could trigger a global economic downturn which would depress their profits.

Still China’s near insatiable thirst for oil has catapulted the communist giant to the second largest petroleum consumer after the U.S. Since 1996, China’s oil consumption has jumped by 100 percent to nearly 8 million barrels a day or a quarter of OPEC’s total daily output! That puts the PRC ahead of Japan.

The People’s Republic of China thirst for petroleum has not only driven demand, thus forcing up prices, but has also created an interesting geopolitical situation where the Beijing government, like a player in a game of global Monopoly, literally buys up any and all the properties on the board. This brings about seemingly curious, but totally logical, oil deals between Beijing and Sudan and a host of other states. The PRC is buying up the board and the power to control oil, energy and raw material supplies at the source. It also allows China greater political clout in the developing world.

Because of an impending economic slowdown the USA, there’s no question that the global economy will feel the pinch and that countries in the developing world may especially feel the pain. The UN’s recently released World Economic Situation and Prospects 2008 study forecasts that global economic growth will slow to 3.4 percent this year, compared to 3.7 percent in 2007 and 3.9 percent in 2006. Still, “U.S. consumption, which has been driving much of the growth in the recent period, is clearly not going to be sustained in the forthcoming period,” according to officials.

American GDP growth for 2007 was a still significant 2.2. percent, hardly anemic by the standards of Japan (1.9) or many of the European Union powerhouses France (1.9) or Germany (2.6). The growth is just not as fast. Given the impressive American GDP growth rates of the past five years, with high job creation and low unemployment, it’s a bit like driving comfortably along an interstate in high gear and then, because of road conditions, having to shift down. You are not stopping, but instead of cruising at 65 you are driving at 40, but still moving forward nonetheless.

Higher energy prices — beyond the obvious higher cost of by buying gasoline for your car — have created dramatically steep increases in transportation prices; the trucking industry, airline travel, and delivery costs. Such items in turn created higher costs for shipping food and thus translate into higher supermarket prices. All of this combines to serve as a millstone to expansion and prosperity.

Will the Bush Administration’s bipartisan economic stimulus package deal for American families boost spending sufficiently to avert a recession? Hardly. But the plan remains an important psychological first step and commitment to moderating the fear factor.