ABU DHABI (Reuters) - The current price of oil is harming global economic growth and is a mounting concern for consuming nations, the deputy executive director of the International Energy Agency (IEA) said on Wednesday.
Oil has surged to its highest since 2008, boosted by strong demand growth, worries over the stability of major crude producers in the Middle East, and tighter supplies that are cutting into inventories, Richard Jones said in an interview.
“Oil at $120 or more has an effect on economic activity. We have seen similar levels during times of economic slowdown if not recession,” Jones said.
Policymakers in the United States and other major oil consuming countries have warned that higher gasoline prices will slice into consumers’ budgets, which could dampen growth.
The head of the International Monteary Fund warned in February that if oil prices remain around $120 for an extended period economic growth would be hurt.
OPEC members are so far reluctant to add supply to the market, arguing that it is in balance and that the producers’ group can do nothing about the speculative factors it blames for the runup in prices.
However the IEA sees fundamental reasons for the price increase, said Jones.
“The price began rising in the fourth quarter of 2010 because demand exceeded supply by 1.1 million barrels per day (bpd). At that point stocks were falling and companies were willing to pay more for oil,” he said.
OPEC appears to have ruled out an early policy meeting to address high oil prices and Kuwait suggested on Tuesday the floor price for crude may well have shifted higher to $90 a barrel or more.
The producers’ group is also traditionally reluctant to increase oil production in the second quarter of the year when crude demand normally softens due to seasonal factors.
Repoting by Amena Bakr; Writing by Robert Campbell