Fatih Birol, Chief Economist and Director- Global Energy Economics, Directorate at International Energy Agency said the high oil prices are acting as brakes for global economic recovery. He is optimistic about the US and feels India and China have great possibilities of growing significantly in 2013.
Business leaders from around the world are concerned about one key issue, the price of crude oil as it plays a significant role in the global economy. Fatih Birol, Chief Economist and Director- Global Energy Economics, Directorate at International Energy Agency said the high oil prices are acting as brakes for global economic recovery. He is optimistic about the US and feels India and China have great possibilities of growing significantly in 2013.
However, the high oil prices may act as a dampner, especially for energy importing countries like India, he opined. But, he is hopeful of seeing oil production growth and therefore, expects prices to remain around USD 100 per bbl. “I would in any case expect that the prices in the year 2013 would remain at least around USD 100 per bbl, which is definitely not a very good news for the energy importing countries such as India and it will be a good surprise if the prices go below USD 100 per bbl,” he explained.
Here is the edited transcript of the interview on CNBC-TV18.
Q: One of the questions that we often try to answer is where are crude oil prices headed. That is the question that business leaders from across the world are also focused on because if there is a sign of even the slightest recovery in the global economy, there is also the possibility that high crude oil prices might put the brake on that. Fatih Birol had some fascinating insights into how he expects the crude oil market to behave this year, where prices are headed but, more importantly the role of the US in energy supply in the course of the next five years.
A: When you look at 2013, I see Europe as the weakest part of the global economy. I have a bit of a question mark but, I also have some optimism for US recovery and I expect China and India to grow significantly. It will be 5 to 6 percent in India and perhaps 7 to 8 percent in China. However, there is one major question mark, namely the role of energy in the global economic recovery.
Today, we have about USD 110 per bbl price of Brent and I believe that high oil prices are playing the role of a handbrake for the global economic recovery. I would in any case expect that the prices in the year 2013 would remain at least around USD 100 per bbl, which is definitely not a very good news for the energy importing countries such as India and it will be a good surprise if the prices go below USD 100 per bbl.
Q: Given that the Organization of the Petroleum Exporting Countries (OPEC) controls pricing to a large extent, there has been considerable opposition amongst many OPEC member nations against Saudi Arabia pumping extra or surplus oil over the course of the last several months. That is what has helped key prices reach where they are. What do you expect the stance of the OPEC to be this year and hence, how will it impact the ability of Saudi Arabia to continue pumping surplus oil and at least keep prices here, if not move them lower?
A: Saudi Arabia is the central banker of the oil industry and they are playing an extremely constructive role in order to comfort the markets in the last few years. I expect them to continue this role. I also expect to see a production growth coming from Iraq significantly, which will also further comfort the market.
We are also seeing growth coming in oil production in the United States as a result of the unconventional oil revolution in United States. These are the factors which comfort the markets but, the demand is also very strong, coming from China, from India and the Middle East.
As a result, I would think that the oil market will be staying at USD 100 per bbl and if there are some further geopolitical tensions in Middle East, this will definitely be unwelcome news as far as international oil prices are concerned.
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