LONDON – Increasing oil prices are entering “a dangerous zone” that could imperil a fragile economic recovery in developed nations this year, the leading energy watchdog warned on Wednesday.
“Oil prices are entering a dangerous zone for the global economy,” chief economist Fatih Birol from the International Energy Agency (IEA) was cited as saying. “The oil import bills are becoming a threat to the economic recovery. This is a wake-up call to the oil consuming countries and to the oil producers.” IEA analysis indicates that in the past year the oil import costs for the 34 countries in the Organisation for Economic Cooperation and Development (OECD) had soared by $200 billion to $790 billion at the end of 2010.
As oil prices edge towards 100 dollars, Birol’s comments are likely to heap pressure on oil cartel OPEC, which last month decided to leave production quotas unchanged despite the rising cost of the commodity. Oil prices hit new two-year highs on Monday amid confidence in increased global demand after the US economy showed more signs of recovery.
New York’s main contract, light sweet crude for February delivery, reached $92.10, a level last seen in October 2008. Brent North Sea crude meanwhile hit $96.17, also its highest level in more than two years.
Birol stressed: “It is not in the interest of anyone to see such high prices.” He noted that OECD countries account for about 65 percent of all global oil imports. “Oil exporters need clients with healthy economies but these high prices will sooner or later make the economies sick, which would mean the need for importing oil will be less,” he said. Birol added that in the short term, “it may not be a bad idea that the producers are ready to increase production and show their understanding that these high prices are not good for the global economy.”
