Persistently high oil prices could derail global economic recovery and potentially lead to a similar growth picture seen in the 2008 recession, the International Energy Agency (IEA) chief economist warned on Tuesday.
“My worry is that the current prices (are) a major risk for the global economic recovery and I’m very worried to see the same movie that we saw in the year 2008,” said IEA economist Fatih Birol.
He said that there is “strong potential” that this year’s surging oil prices could further unsettle already weak international economies, impacting Asian energy hubs India and China, the two largest and fastest growing economies in the world.
“High oil prices are a significant risk to derailing the economic recovery not only in the OECD countries, but also in China and India,” the IEA economist said, referring to the Organization for Economic Cooperation and Development (OECD) which groups the world’s developed nations.
The IEA, based in Paris, is the energy watchdog of the 34-member OECD.
Oil reached an average price of $110 this year, notably higher than the $90 seen in 2008 when crude hit a record high of above $147 before the start of the global recession, Agence France-Presse reported.
“China and India are two most important economies which helped us get out of the economic crisis. If they go for tightening of monetary policies, this may lead to a slowdown in their economies which is bad news for all of us,” Mr. Birol added.
Brent, the biggest of the major classifications of crude oil, reached $111.79 a barrel on Tuesday morning. Brent crude is used to price two thirds of the world’s internationally traded crude oil supplies.
Earlier this month, the IEA had upped the pressure on the Organization of the Petroleum Exporting Countries to increase output by forecasting a steep rise in oil demand later this year and predicting the strain on supply would last over the medium term, Reuters reported.
The energy watchdog raised its valuation of how much OPEC oil would be needed this year by 400,000 barrels per day (bpd) to 30.1 million bpd.
OPEC is a cartel of 12 oil producing and exporting nations and is boosted by oil-rich Gulf states including Saudi Arabia, Kuwait and the United Arab Emirates contributing heavily to the global supply.
(Eman El-Shenawi, a writer at Al Arabiya English, can be reached at: firstname.lastname@example.org.)