When Horst Kohler, the new managing director of the International Monetary Fund, announced at the beginning of August that the IMF had revised upwards its forecast for world economic growth, it looked as though this year's annual meetings would be taking place in a climate of unequivocal confidence and optimism.

The US economy is still growing strongly but showing signs of the inevitable and desirable slowdown. European growth is at last beginning to make a significant dent in the continent's high levels of unemployment, many of the countries worst hit by the crisis of 1997-98 are bouncing back to be almost as strong as they were before, and even Japan is showing signs of life. The world economy is enjoying its strongest and most balanced period of growth for a decade.

But although the outlook is still generally bright, the ministers, bankers and officials meeting in Prague can no longer fell certain there is nothing but blue skies ahead. A thick black cloud is just beginning to drift across the sun.

Most of the rise in the price of oil had already happened by the summer, but just a few months ago most analysts and policymakers were confident that oil could not stay at $30 a barrel for long. Now it has risen to around $35, and shows no sign of falling back in the immediate future. Depending on the weather this winter, some forecasters have been suggesting that spikes up to $50 or even $70 a barrel are possible. The claim that the world economy is less vulnerable to an oil shock than it was in 1973 is about to be put to the test.

Half of the story of the tripling of the oil price in the past 18 months has been the strength of the world economy. The financial storms that first hit Thailand in 1997, and swept through the world before blasting Brazil at the beginning of 1999, have done less damage to the global economy than anyone might have dared to hope two years ago. Prompt and decisive rate-cutting from the US Federal Reserve and the central banks of Europe meant that the US economy barely broke step, and laid the foundations for the current healthy growth in the euro-zone.

Of the risks that still exist, most are regional in scale, Europe may fail to raform rapidly enough to raise its productive potential significantly to keep unemployment on a downward course; Japan's faltering recovery may wilt under the burden of its soaring national debt. Both economies may suffer from monetary policy overkill, as the central banks struggle to get to grips with the implications of being newly created or made newly independent within the last few years.

There are only two real potential problems that deserve to be taken seriously as global threats: the long-awaited collapse of the US markets, and the price of oil.

The prophets of doom have been confounded for so long by the record-breaking success of the US economy that many seem to have lost the courage of their convictions. But the facts are still disturbing: a current account deficit of more than 4 per cent of gross domestic product, a recorded household savings rate that has fallen to zero, and equity valuations far higher than average levels seen in the past. To many, it all still has the unmistakeable flavour of an unsustainable boom.

The factor that jight be able to keep it all together, according to thinking now gaining support even inside those bastions of scepticism the Fed and the IMF, is the spectacular growth in US productivity. If productivity growth can be sustained at around the 5 per cent-plus rates reported recently, then the economy may be able to contine to grow at close to its current rapid cip, and an inflow of foreign capital looking for the greater opportunities for profit may conine to sustain equity prices and the dollar.

Despite the research that suggests that the great bulk of the productivity gains have been concentrated in IT and just a handful of other industries, it is certainly possible that productivity growth will stay high. In the early 1970s it slowed sharply for reasons that are still not fully explained, so productivity growth may have picked up again in the late 1990s for reasons that are equally obscure. But to the pessimists, the story is eerily reminiscent of the explanations why Japanese economic supremacy would be everlasting that were popular in the 1980s but are little heard today.

If the US does come to grief, meaning a stock market crash, a plummeting dollar and a recession triggered by a collapse of consumer confidence, then it will be difficult for the rest of the world to avoid following suit. As president Clinton has warned, oil could be the trigger.

So far the effects of the rise in the oil price have been felt more in Europe than in the US, because the European Central Bank has felt a greater necessity than the Fed to raise interest rates in response to the rise in the headline rate of consumer price inflation. But, as in 1973 and 1979, the twin effects of an oil shock in raising prices and cutting output will be felt in all oil-consuming countries.

The developed world has become more careful about its use of oil in hte past two decades: oil efficiency has improved by about 25 per cent.

But all modern economies still run on oil. For all the talk of a dematerialised, digital new economy in the US, annual oil consumption has risen by 11 per cent since 1990. And half of the US's petroleum consumption comes from imported oil.

The US administration hs made it clear that it wants to see oil prices fall back to around $20-25 a barrel. But with very little spare capacity for production of refining, and stocks at or close to historic lows, there is little sign of that happening immediately.

The Organisation of Petroleum Exporting Countries is playing a game of chicken with the oil-consuming countries, especially in Europe: pressuring them to cut taxes on fuel to help cushion the impact on consumers.

Its agreement earlier this month to lift production by another 800,000 barrels a day was seen as little more than a token gesture by the markets.

A world recession would not be in Opec's interests, any more than it is in anyone else's. But for the policymakers gathering in Prague, the possibility will be enough to cast a shadow over their meetings.