High oil prices threaten to derail the global economic recovery in the developed world, the chief economist of the International Energy Agency has told The Financial Times.
“Oil prices are entering a dangerous zone for the global economy,” Fatih Birol said in an interview with the FT published yesterday. “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.”
The Financial Times said Mr Birol’s remarks added pressure on the Organisation of Petroleum Exporting Countries to increase production.
Mr Birol told the Financial Times: “It is not in the interest of anyone to see such high prices. 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.
“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.”
According to an analysis by the International Energy Agency, which represents oil consuming, mostly Western, economies, during the past year oil import costs have risen by €150 billion for the 34 countries in the Organisation for Economic Cooperation and Development.
Mr Birol’s remarks follow other recent warnings from the IEA that high oil prices could threaten the economic recovery. This week, the price of oil jumped by as much as $1.32, or 1.4 per cent, to $96.07 a barrel in London – a level which has not been seen since October 2008.
Some analysts believe oil will rise above $100 a barrel this year, pushing up the cost of petrol and household energy bills. This is not good news for Malta which is the only EU member state which depends entirely on fossil fuels to produce its energy and which already witnessed a sharp hike in its utility bills this year.
Speaking in Parliament last March during a debate on an opposition motion to reverse the increase in utility rates Prime Minister Lawrence Gonzi said the government had to increase these tariffs because the international price of fuel increased to $80 per barrel and was bound to resume its steep rise once the major economies started roaring again.
In another interview, this time with the BBC World Service, Mr Birol again warned about the current high price of oil saying: “There is definitely a risk of major negative implications for the global economy.”
He explained that the oil price was central to both national and personal budgets.
“If the oil price goes much higher, it affects everything from the trade balance to household spending,” he said.