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IEA and the US concerned about oil price jump
Published on October 15, 2009 by oilprices · No CommentsThe IEA and the US Secretary of Energy warned on Wednesday that the fast rise in oil prices could pose a risk to global economic recovery. Crude oil futures, boosted by perceptions the economy is recovering, surged to a new 2009 peak above $75 a barrel on Wednesday, a level IEA Chief Economist Fatih Birol called “unjustifiably high” in an interview with Reuters.
“The rapid hike of the price is certainly a concern,” IEA Executive Director Nobuo Tanaka told reporters on the sidelines of the agency’s biennial ministerial meeting in Paris, also attended by Birol and U.S. Secretary of Energy Steven Chu.
“If the oil price moves too fast, the economic recovery may be hampered,” Tanaka later told Reuters Television, adding that the agency, which advises 28 industrialised economies, also had concerns about supply capacity following delays in or cancellation of investments in oil exploration and production.
The IEA and OPEC have both increased their forecast for global oil demand in 2010. “When the economy starts recovering we may have a shortage on the supply side and that may create a price spike. That is a major concern,” Tanaka said.
Birol said investments in the oil industry remained down 20 percent compared with 2008, adding he had seen no “noteworthy progress” on this front over the summer. The United States also voiced concern about the impact of volatile oil prices.
“Spiking prices in oil and gas are very counter-productive because they can set off recessions… What we want are stable prices in oil and gas,” Chu told reporters, adding a jump in oil did not necessarily foster the development of cleaner energies.
“The renewables can be encouraged in a number of ways but to wish that certain fossil fuels prices jump up is, I think, not correct,” Chu added on the sidelines of the IEA meeting.