ST. PETERSBURG (Dow Jones Newswires), June 16, 2011
The continuing high price of crude oil risks creating a hard landing for the world economy, the International Energy Agency's Executive Director Nobuo Tanaka said Thursday.
Addressing a briefing at the start of the St. Petersburg International Economic Forum, Tanaka said: "If the current oil price continues it will be to the detriment of the global economic recovery."
The current situation "is starting to resemble 2008, and we know that 2008 was a very hard landing for the world economy. We'd prefer a soft landing," Tanaka said.
The IEA is still monitoring the global oil supply situation in the wake of this month's fractious meeting of the Organization of Petroleum Exporting Countries, Tanaka said, against a background of evidence showing that the world needs more oil from OPEC, which controls around a third of the globe's production and is home to almost all of the world's spare production capacity.
OPEC's ministers last week refused to endorse a group-wide increase in output to take the edge off crude prices, to the frustration of its largest producer Saudi Arabia. Saudi also has the bulk of OPEC's spare capacity.
Earlier in the briefing David Fyfe, head of the IEA's oil markets division, said that current prices for crude oil don't reflect any degree of "excessive speculation," but rather reflected a genuine tightening in the world market.
Fyfe's comments came two days after French President Nicolas Sarkozy made a sweeping attack on speculation in commodities markets, continuing a campaign for greater regulation that has been the centerpiece of France's presidency of the Group of 20 largest industrialized and emerging economies.
Fyfe also noted Thursday that the IEA's research showed that oil prices do more to reflect exchange rates than vice versa.
Fyfe and other officials were summarizing a new IEA report on the outlook for the world energy market over the next five years. As reported, the IEA has revised upwards its estimate for average oil prices in that period by $19 to $103 a barrel.
The price of crude oil rose by nearly $2 a barrel in Europe and nearly $1 a barrel in the U.S. on the release of the report. At 0850, the benchmark Brent blend was trading at $114.78 a barrel on the Intercontinental Exchange, while the New York Mercantile Exchange's contract for oil for July delivery was up 82 cents at $95.63 a barrel.
Over 90% of the increase in global demand in the five-year period will come from emerging markets, Fyfe said. He also said that a "tidal wave" of new refining capacity in emerging markets will continue to pose an existential threat to many refineries in developed markets, estimating that the overhang of global refining capacity may reach 4 million barrels a day by 2016.
Copyright (c) 2011 Dow Jones & Company, Inc.
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