Singapore: High oil prices threaten to worsen a global economic slowdown and crude producers should consider boosting output, the chief economist for the International Energy Agency (IEA) said.
“The current high oil prices have the potential to strangle the economic recovery in many countries,” Fatih Birol said in a speech Wednesday in Singapore. “I hope that high oil prices don’t slow down Chinese economic growth and the negative effect that would have on the global recovery.”
The HollyFrontier Corp. refinery stands in Tulsa, Oklahoma, US. Photo: Bloomberg
Crude has jumped to $100 a barrel from $75 in October amid signs the US economy will likely avoid a recession. Most economists expect global economic growth to slow next year as Europe’s debt crisis threatens to drag the continent into recession.
Birol suggested crude producers should boost output amid growing demand in developing countries and falling inventories in wealthy nations.
The Organization of Petroleum Exporting Countries (OPEC) is meeting later Wednesday in Vienna to decide whether to change the cartel’s output quotas.
“I’m sure Opec knows much better than me what to do,” Birol said when asked if OPEC should raise output. ”But seeing that oil prices are still high today and the negative effect that has on the recovery of the global economy, I hope the energy producing countries will take these things into account and make their decision accordingly.” Birol said crude prices could rise to $150 by 2015 if oil-producing countries in the Middle East (West Asia) and North Africa don’t invest $100 billion a year to maintain existing fields and develop new ones. More than 90% of global crude production growth during the next 20 years will come from that region, led by Saudi Arabia, Iran, Iraq, Kuwait, Algeria and United Arab Emirates, Birol said.
“Recent developments, including the Arab Spring, have changed the mindset of many governments,” Birol said “In some countries, oil investments have been diverted to social spending. Oil policies are taking on a more nationalistic tone, which means not to increase production as much is needed in the world market.”