IEA: Oil Prices Could Spike By A Third In Near Term
The International Energy Agency warns oil prices could spike as high as $147 a barrel if unrest in Africa and the Gulf cuts investment in output, while oil producers claim the real problem lies in likely defaults among euro-zone nations and banks.
While the IEA , which advises major oil-consuming countries on energy policies, said on Wednesday that oil prices could spike by a third to an all-time high, the Organization of Petroleum Exporting Countries said the main risk lies in declining prices.
Relations between OPEC and the IEA have been strained this year. OPEC failed to agree on an increase in oil output after war in Libya led to a supply shortage and higher oil prices. The IEA then released its stockpiles to compensate for the loss and to help support the flagging economic recovery.
OPEC has already said it sees no need to increase oil output when it meets in December, but he IEA insists that current prices are damaging the global economy.
“In 2011, $102 is the average price through to today which means the global economic recovery is at risk. We are in the danger zone for the global economy at current levels,” said IEA economist Fatih Birol at a news conference.
“There is a possibility that production growth from the [Middle East and North Africa, MENA] region may not be what the consumers would like to see. This would be a pity for the global economy, a pity for the oil sector, and a pity for those governments.”
The IEA’s annual World Energy Outlook report claims that, if investment in the MENA regions runs one-third lower than the $100 billion per year required between 2011 and 2015, consumers could face a near-term rise in oil prices to $150 a barrel.
OPEC nations account for one-third of the world’s oil, and have been facing unprecedented political unrest this year. However, in its monthly report on Wednesday, OPEC said it was not overly concerned by underinvestment, in light of current oil prices and large increases in public spending.
“It is expected that economic growth in 2012 in the MENA region will be stronger than in 2011, mainly due to the massive infrastructure and industrial development in Saudi Arabia, and robust growth in Iraq,” the report reads.
“The economic expansion of the region might also be affected by the rebound of Libya and other North African economies affected by unrest in 2010,” it said, while focusing more on the impact of Europe’s debt crisis.
“Worries about its [Europe’s] sovereign debt situation and the possibility of defaults by some of its member states — which could bring down major European banks and push the euro-zone into uncharted territories — are the main concerns that have driven markets over the recent weeks,” said OPEC.
OPEC also noted that high European unemployment levels were not only depressing consumption, but increasing social tensions in some euro-zone economies.
“European economic growth forecasts for 2011 and 2012 are now reduced, which undoubtedly will affect the global economy through euro zone trade and financial relationships with other parts of the world,” said OPEC.