With crude oil prices pushing to above $50 per barrel, the world is dividing into camps of winners and losers, as exporters celebrate tens of billions of dollars in windfall revenues and importers struggle to pay the huge extra costs.
Already, economists are fretting that prices could jar fragile economic recoveries in industrialized countries that are heavily dependent on imported oil, such as the United States, nations in Western Europe and Japan. The higher prices are particularly unwelcome in Japan, where they risk crimping an economy that is just now awakening after a 13-year slump.
Higher oil prices have led Japanese ferry companies and airlines to charge more and could ruin French efforts to meet European Union budget deficit targets.
Even harder hit are oil-poor, developing nations such as Thailand, which is now importing 140 percent more oil than a decade ago to fuel an industrializing economy. The Thai government has enacted emergency energy conservation measures that include reduced hours for department stores.
Finance ministers from the Group of Seven industrial nations declared in a statement Friday, after meeting in Washington, that current prices are "a risk. So first, we call on oil producers to provide adequate supplies to ensure that prices moderate. Second, it is important consumer nations increase energy efficiency."
By contrast, the new income is welcome news in the once-flagging oil-producing Persian Gulf states. The cash infusions are being used to repair crumbling highways, build schools, and pay down debt.
Mexico's state oil monopoly Petroleos Mexicanos, or PEMEX -- which accounts for one-third of the national government's revenue -- is on average taking in about $14.4 million more per day than it was in the first eight months of the year, according to George Baker, an oil industry analyst based in Houston.
Russia, which now pumps as much oil as Saudi Arabia, is suddenly flush with cash badly needed to cover a shortfall in pension payments and a mountain of backlogged foreign debt.
"There is now enough money for everything," said Abdel Aziz Abu Hamad, the director of economic integration at the Gulf Cooperation Council, the alliance of six Persian Gulf states.
Crude prices pushed past $50 last week as hurricanes wrecked drilling platforms in the Gulf of Mexico and fear mounted over increased rebel attacks in oil-producing Nigeria and continuing fighting in the Middle East. They reached record levels in dollar terms, but on an inflation-adjusted basis remain below prices of the early 1980s.
Economists are divided over whether prices will remain at such high levels. Some predict a decline following the U.S. presidential elections, but others see the beginning of a long-term trend, driven in part by a general rise in global oil demand as the giant economies of China and India undergo massive industrial transformations.
Japan and some countries in Europe have buffered themselves against hikes through forward-looking steps to minimize their reliance on oil.
Japan's steel industry, for instance, has abandoned oil altogether, switching entirely to coal-based fuels to heat forges. Japan now also generates 30 percent of its electricity from nuclear power. Overall, those efforts have reduced the cost of oil imports to 1.2 percent of Japan's gross domestic product, compared with over 4 percent in 1974.
Still, economists predict that rising oil prices will shave almost half a percentage point off the projected annual growth of 3 percent this year in Japan. That comes at a time when the nation's long-awaited recovery is already showing some signs of weakening due to other factors.
Countries in Europe may fare little better. French officials had predicted economic growth of 2.5 percent for 2005, a calculation that is key to reaching its E.U. budget deficit target of $55 billion. But as oil prices skyrocket, economists say real growth in France could be shaved to as low as 1 percent next year, perhaps forcing the government to impose unpopular budget cuts.
In developing nations that are not oil producers, the impact of price increases is magnified. Such nations often lack alternative energy sources and have energy-inefficient factories. If they have no refineries, they must import higher-priced refined oil or gas rather than cheaper crude.
In addition, many countries in Southeast Asia and Latin America are still recovering from steep currency devaluations over the past decade that have already made oil, which is priced in dollars, more expensive.
Rapid economic growth has turned China into the second-largest consumer of oil after the United States, and that thirst for oil has been one factor in driving up its price. Even as crude prices have soared about 65 percent in the past year, China imported 586 million barrels during the first eight months of the year, up 39 percent over the same period last year.
China's economy is forecast to soar by 9 percent this year. But Chen Jiulin, managing director of China Aviation Oil, warned recently that rising energy costs could put inflationary pressure on the Chinese economy, according to the New China News Agency. As "businesses have to raise their prices and make less profit, they become less competitive. Consumers have to pay more. Thus, it will slow the development of the Chinese economy," Chen wrote.
That could be bad news for China's neighbors, notably South Korea and Japan, which have grown increasingly reliant on exports to China for their own economic growth. The loss of sales to China could be even more harmful than the rise in oil prices.
"If oil prices remain around $45 to $50 per barrel, it will rob countries like Japan of precious growth, but it won't be a disaster," said Tetsufumi Yamakawa, chief economist for Goldman Sachs in Tokyo. "But if oil continues to rise and causes a slowdown in China, where oil consumption is very high right now, it will be a real negative for the global economy."
For oil-exporting nations, meanwhile, the trends go in the other direction. After 11 years of budget deficits, the Saudi government is predicting a surplus exceeding $35 billion this year -- or more than 50 percent of its budget -- based mainly on higher income from oil. The oil has helped the royal family avoid the politically unpopular step of raising taxes at a time when its rule is under pressure from Islamic radicals.
This year, Saudi Arabia's stock market has soared 44.7 percent. Bahrain's has risen 25.2 percent.
In many parts of the oil-producing world, the new income has major political implications. In Venezuela, a top oil exporter to the United States, the windfall is helping to fuel President Hugo Chavez's Robin Hood image. He is funneling the proceeds into social programs for the poor that have boosted his popularity.
But even in exporting countries, the higher prices can be a mixed blessing. Mexico, for instance, is a leading crude producer but has a shortage of refineries, meaning that it has to re-import higher-priced gasoline. So despite the record prices for crude, Mexican consumers are paying dearly at the pump, about $2.06 per gallon last week.
From Mexico City to the Middle East, governments are using oil revenues to fill budgetary gaps rather than making structural changes to their economies. In Venezuela, Chavez is turning aside calls for investments in infrastructure. In Mexico, President Vicente Fox, who has been unable to win congressional approval for key tax reform, has instead tapped rising oil revenues to fund many of his promised housing, education and social programs.
Correspondents in Amman, Jordan; Beijing; Mexico City; Moscow and Paris contributed to this report.