IEA sees risk of recession if oil stays high
A gas station worker fills a car's tank with ethanol in Sao Paulo March 9, 2007.
Credit: Reuters/Sergio Moraes
LONDON (Reuters) - The head of the International Energy Agency said on Wednesday there was a risk of global recession if oil prices stayed around the current level and hurt emerging economies.
Nobuo Tanaka, head of the agency which advises 27 industrialized countries, also said the supply and demand balance in the oil market is tight, leaving consumers vulnerable to a fresh surge in prices.
"If it continues, this level of price, there is a risk of recession," Tanaka told Reuters in an interview.
"It very much depends what will happen if high prices affect the emerging economies, China, India and the Middle East. Still their growth is very robust, so we don't see any indication of slowing down."
Oil has fallen to around $93 a barrel from a record high of $147.27 on July 11, partly due to weak demand in the United States, the world's top oil consumer, and other developed economies.
The drop accelerated this week because of financial market turmoil following the collapse of U.S. investment bank Lehman Brothers.
Tanaka said that oil could easily head higher once again.
"The market is tight. Prices are very volatile with hurricanes, accidents, shutdowns. The price could easily spike."
The IEA has yet to decide whether the impact of Hurricane Ike on U.S. oil and gas output warrants a release of oil from its strategic reserves.
"We don't have enough information," Tanaka said. "We are fully assessing the situation."
"We are very much ready to move ahead if necessary."
IEA member-countries hold emergency oil stocks for use in case of supply shocks. They were last tapped in 2005 after Hurricane Katrina caused major disruption in the Gulf of Mexico.
The Organization of the Petroleum Exporting Countries responded to lower prices last week by agreeing to comply with its output targets, a move that would cut supply by about 500,000 barrels per day.
But the IEA urged the producer group, source of 40 percent of the world's oil, not to make any cutbacks.
"We sincerely hope producers will continue the current level of production," Tanaka said.
(Reporting by Alex Lawler)
