Oil prices may threaten global economic recovery, says energy agency

http://www.guardian.co.uk/business/2011/jan/05/oil-prices-threaten-global-economic-recovery

Oil prices are entering the "danger zone" and threaten to derail the fragile global economic recovery, according to Fatih Birol, chief economist at the International Energy Agency.

The Paris-based government policy adviser calculates that the oil import costs for the 34 countries that make up the Organisation for Economic Co-operation and Development (OECD) soared by $200bn over the past year to reach $790bn by the end of 2010.

"Oil prices are entering a dangerous zone for the global economy," Birol told the Financial Times. "The oil import bills are becoming a threat to the economic recovery. This is a wake-up call to the oil consuming countries and to the oil producers."

The price of Brent crude hit $95 a barrel for the first time in 27 months on Monday. Although oil prices have fallen recently, analyst Sanford Bernstein is predicting that crude oil will average $90 a barrel this year, compared with $79.60 in 2010. Roger Read, an analyst at Morgan Keegan & Co, is predicting the oil price will range between $75 and $120 this year.

(more)

cf. http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=115&topic_id=269603&mesg_id=269603

“OPEC is not interested in compliance right now,” Nordine Ait-Laoussine, the former Algerian oil minister who now runs Geneva-based consultant Nalcosa SA, said in an interview in Vienna. “They’re concerned about the dollar because as the dollar weakens, prices go up. They’re not paying any attention to production discipline.”

http://www.bloomberg.com/news/2010-10-15/opec-members-seek-100-a-barrel-oil-as-sliding-dollar-cuts-real-revenue.html

http://www.marketwatch.com/story/china-india-to-drive-demand-for-oil-through-2030

"Worldwide demand for oil is projected to climb 47% between 2003 and 2030, largely driven by economic expansion and continued demand for the fuel in developing countries like China and India, according to an international energy outlook released Tuesday by the U.S. Energy Department."

The EIA's projection for the price of oil and increased supply are laughable, but they have it right when the project the biggest growth in the demand for oil will come from the rapidly growing economies of China and India. Of course, this isn't exactly hard to see coming.



as the article you referenced said OPEC is "not paying any attention to production discipline" ... meaning they are not holding production steady but increasing production which does not cause the price to go UP but DOWN.

..."OPEC kept its production target at 24.845 million barrels a day at its meeting yesterday. Output from the 11 members bound by quotas exceeds the group’s ceiling by 1.9 million barrels a day, or about the same as produced by Nigeria or Angola, according to Bloomberg estimates. "

...or more meaningfully 1.9 million barrels /day exceeds the target by 7.7% ... definitely NOT how to drive prices up. Despite OPEC countries increase in production the price is still going up.

Of course, in the short run the speculators have a big impact. But speculators act on their anticipation of the balance between supply and demand. They obviously are anticipating price increases. The secular trend which everyone expects to continue is for higher prices from now on with no end in sight.

That's why unless people embrace meeting some of the oil demand with biofuels we are headed for more recession - 2012 and on (hopefully not in 2011). This means meagre growth rates and pathetic job creation numbers for the foreseeable future. By using biofuels to supply some of our gasoline needs we could mitigate the price increases for oil and perhaps avoid another recession.

But, I don't see this happening. Biofuel (i.e. ethanol) is the work of the devil, dontcha know?

came to you through a truck that runs on diesel. The rising price of oil is what fueled the inflation of the early and late 1970's.

I believe that the spike in oil prices the last time is what pushed the world economy over the edge. People were not able to pay for food or there mortgages because they had to pay for gas to get to and from work. But no republicans would ever do anything about it because hell they would lose their big campaign donations from oil companies.

and yet we do nothing about it as a nation or a society. We believe we are going to live forever.