IEA says further oil price rise could damage recovery

A rapid increase in the price of oil could damage hopes of a global economic recovery, but the impact of current levels around $70 a barrel is difficult to judge, the IEA’s executive director said Tuesday.

“If the price is still moving up farther that could create a problem,” depending on how robust an economic recovery proves to be, Nobuo Tanaka told reporters. “We haven’t seen clear evidence in oil demand for an economic recovery so we are watching carefully,” Tanaka said.

It is “difficult to see” if $70 oil is proving problematic for the world economy, he also said. In separate remarks, Tanaka said he sees gasoline demand falling in the long-term, although the fall in the demand for diesel is likely to be less.

Efforts to increase energy efficiency and the possibility of powering vehicles with alternative fuels are likely to cause a drop in demand in the long-term, he said, but diesel is “more competitive in long-distance freight.” He also noted the potential importance in the long-term of biodiesel.

Tanaka also affirmed his support for bringing India and China into the IEA, and said “why not” change the rules so they don’t first have to become members of the Organization for Economic Cooperation and Development, the IEA’s parent body.

Tags:  IEA, oil price, recovery