VIENNA (Reuters) - The high oil price could “strangle” efforts to get the global economy back on its feet and may also hamper Asia’s ability to help the West exit its crisis, the International Energy Agency’s chief economist said on Thursday.
The IEA’s Fatih Birol said the world economy was in a more fragile state now than during the crisis of 2008-2009, when oil prices were lower.
“I believe oil prices are well-positioned today to strangle the economic recovery efforts,” he told Reuters on the sidelines of a seminar with the U.N. nuclear agency in Vienna.
Oil prices rose toward $108 on Thursday, helped by bigger-than-expected stock draws in the United States and tensions around Iran’s nuclear ambitions, while stronger German data offset some of the negative sentiment generated by Wednesday’s poor bond auction.
Birol said Europe was especially at risk from the high oil price, but that it could also turn into a major problem for energy-hungry Asia.
“It is a major risk for the slowdown (of) the economic growth in Asian countries which were the countries which brought us out of the financial crisis in 2008,” said Birol, whose organization represents major energy consuming countries.
“If we don’t have their strength this time it will be much more difficult to go out of this financial crisis.”
The Organization of the Petroleum Exporting Countries (OPEC) has already signaled it sees no need to release any extra oil to the markets when it meets in December but will probably face increased pressure from consumers as the IEA insists that prices are damaging the economy.
Asked whether the oil-producing bloc should increase production because of the danger to the global economy, Birol said it was up to OPEC.
“I hope that colleagues from the producing countries are also looking at the market indicators carefully, including the diminishing OECD stocks levels and the fragility of the global economic situation and make their decisions by taking into account all of these indicators,” he said.
“I think the producing countries also need clients with healthy economies.”
Relations between OPEC and the IEA hit lows earlier this year when OPEC failed to agree on an increase in oil output and the IEA released stockpiles to compensate for the loss of Libyan oil and to help support flagging economic recovery.
Paris-based IEA advises 28 industrialized countries and manages their emergency oil stockpiles. IEA member-countries are required to hold emergency oil reserves equal to at least 90 days of their net oil imports.
Earlier this year the IEA tapped member countries’ emergency reserves for only the third time since it was founded in 1974 in the wake of the Arab oil embargo.
The IEA said in its monthly report in early November that supply and demand fundamentals are underpinning stubbornly high oil prices.
Birol said that more than 90 percent of future growth in oil production needed to come from countries in the Middle East and North Africa, for example Iraq, Iran, Saudi Arabia and Kuwait.
But political developments in the region, which has been rocked by upheaval over the last year, may lead to “under-investment” and slower output growth, he said.
Asked about tightening sanctions on Iran over its disputed nuclear program, Birol said the Islamic state’s main crude customers were in Asia, for example China and India.
“There are not yet signs that there will be major implications of those discussions and the debate about Iran’s ability to export today as far as those countries are concerned,” Birol said.
Shortly after he spoke, France’s foreign ministry said the country would impose a unilateral ban on Iranian crude imports.