By Marco Annunziata, chief economist, General Electric Co.

Oil prices are again on the rise ? will this derail the economic recovery? And what if there is an oil shock on the horizon? This column presents an overview of the oil market and its possible effects on the global economy. It argues that if there is a shock, the list of casualties will have Europe at the top with the US close behind.

Oil prices (Brent) are up 14% since the beginning of the year. How bad is this, and how bad can it get? The consensus so far is that this is mostly a demand-driven move rather than a supply shock: after the gloom of Q4, data and news flow have been encouraging, with better than expected activity figures in the US, progress on the Eurozone-crisis front, and resilience in China's economy. The rise in oil prices has been led and accompanied by a 16% surge in stock prices since late-November (S&P500). And the mini-correction of the last couple of days has preserved the correlation: equities inched down 2.2% and oil prices lost 3%. If oil prices had been driven up by a supply shock, or fears of a supply shock, this should be reflected in a more pessimistic growth outlook and a weaker performance of equities. A demand-driven price move is more benign, so in principle the oil price rise should act as a gentle brake on the global recovery and be still consistent with an outlook of moderate but resilient growth.

There is a disturbing feeling of d