Oil price can trigger recession: IEA
Rome, April 22, 2008
There is a risk record oil prices could tip the world economy into recession, executive director of the International Energy Agency (IEA) Nobuo Tanaka said on Tuesday.
Asked whether prices of nearly $118 a barrel could drive the world economy into recession, he said: 'Yes, I certainly have some concern.'
'High prices definitely dampen demand - it's happening now, definitely it will have some negative impact on economic growth - that's for sure,' he told reporters on the sidelines of the International Energy Forum in Rome.
'The oil prices at their current level were too high for everyone. At the same time, output from oil producing countries is sufficient,' Tanaka added.
He said that in IEA's view the current prices were too high for developing countries.
'No single factor was to blame for the surge in oil prices and there is no short term solution to bring down the record level. Lots of elements are behind it,' he pointed out.
'Of course, fundamentals are a key element. But it's not only that. There are other elements, such as the weaker dollar, speculation, weather. All these elements are behind the current price rise. There's no single element we can identify.'
The IEA had recently estimated that world oil demand would slow by an average 300,000 barrels per day this year, largely as a result of the economic slowdown in the US.
Indeed, demand from industrialised countries overall was slowing. However, in 'other parts of the world, notably China, India, the Middle East, there is no evidence of such a slowdown,' Tanaka noted.
'If oil-producing countries were to maintain their current level of production, inventories would be replenished 'and that will lead to better-balanced fundamentals, assuming there are no unforeseen geopolitical events, leakages, accidents, hazardous weather or port strikes,' Tanaka said.
'Spare capacity is very low. Increased capacity would be very helpful,' he added.