Rising Oil Price Threatens Fragile Recovery
High oil prices threaten to derail the fragile economic recovery among developed nations this year, the leading energy watchdog has warned, putting pressure on the Opec oil cartel to increase production.
Over the past year the oil import costs for the 34 mostly rich countries that make up the Organisation for Economic Co-operation and Development have soared by $200bn to $790bn at the end of 2010, according to an analysis by the International Energy Agency.
The increase, due to high crude prices, is equal to a loss of income of about 0.5 per cent of OECD gross domestic product, according to the IEA.
“Oil prices are entering a dangerous zone for the global economy,” said Fatih Birol, the IEA’s chief economist. “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.”
Oil prices have edged closer to $100 a barrel in recent weeks and Brent crude hit $95 a barrel for the first time in 27 months on Monday as the economic recovery has gathered pace.
Although oil prices dropped on Tuesday, the warning from the IEA will put pressure on Opec to increase its production. Despite the high prices, oil ministers decided last month to leave their quotas unchanged.
Ali Naimi, the Saudi oil minister, repeated at the time that he favoured an oil price of “$70 to $80 a barrel” and that there were no plans to convene an extraordinary meeting before June 2 this year.