Jakarta: High oil prices pose a danger for a global economic recovery and industrialised countries stand ready to release oil from stockpiles to meet Middle East supply disruptions, the IEA’s chief economist said on Tuesday.
US crude futures hit a 2-1/2 year high on Tuesday as violence in Libya led one oil company there to shut in 100,000 barrels per day (bpd) of the country’s 1.6 million bpd output.
Investors fear further disruption both in Libya and beyond as protests grip the North Africa and the Middle East, the world’s top oil producing region.
High oil prices were detrimental to the interests of both consumers and producers as they could derail economic growth and curtail fuel demand, the International Energy Agency’s Fatih Birol said.
“Oil prices are a serious risk for the global economic recovery,” Birol told reporters on the sidelines of an energy conference in Indonesia on Tuesday. The IEA is adviser to 28 industrialised nations on energy policy.
“The global economic recovery is very fragile -- especially in OECD countries,” Birol said, adding that oil prices had entered a “danger zone” for the recovery at above $90 a barrel.
Brent traded near $108 a barrel on Tuesday, while US oil traded above $94.
The political turmoil that has swept across the Middle East and North Africa could push prices even higher, Birol said.
The rising cost of oil would weaken the trade balances of industrialised countries, add to inflation and put pressure on central banks to adjust interest rates, he added.
If oil prices average $100 a barrel, the world’s third largest economy Japan would be spending 3 percent of its GDP alone on oil imports, Birol said.
The IEA has a mandate to ask its members, the nations that belong to the Organisation for Economic Cooperation and Development (OECD), to release oil stocks in the case of emergency supply disruption.
It rarely opens the taps but released oil product stocks in 2005 when Hurricane Katrina crippled US Gulf oil operations.
“If they think there is a need to do so, they may well decide to release those stocks in order to cover the markets, if there is a physical disruption,” Birol told Reuters in an interview, referring to 1.6 billion barrels of emergency oil stocks held by IEA members.
He said those stocks were sufficient to cover several supply disruptions.
Birol declined to comment on whether he thought OPEC should boost output to soften high prices and ease concern about potential outages.
“I’m sure if there is a need they will do something,” he told Reuters.
Top oil exporter Saudi Arabia stood ready to pump more oil if needed, Birol said, before rushing to catch a flight to Riyadh, where energy ministers from consuming and producing countries were due to meet on Tuesday.
The kingdom is the only producer with significant spare capacity to meet any large global supply outage.
“Saudi Arabia is doing an excellent job in terms of showing their readiness to act if necessary,” he said. “It is the right policy and I would like to see this policy continue.”