IEA economist says oil in 'danger zone' for economy: FT

Oil prices have risen into a "danger zone" that could harm the global economic recovery, the chief economist of the International Energy Agency told the Financial Times, reiterating a warning he made last month.

"Oil prices are entering a dangerous zone for the global economy," the FT reported Fatih Birol as saying in a front page article. "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 pr oducers." Citing an IEA analysis, the FT said over the past year the oil import costs for the 34 industrialized nations that make up the Organisation for Economic Co-operation and Development have soared by USD 200 billion to USD 790 billion at the end of 2010. That's equal to a loss of income of about 0.5% of OECD gross domestic product, according to the IEA. The IEA, established in the 1970s as the West's energy watchdog to counter the growing influence of the Organization of the Petroleum Exporting Countries, often warns of the risk of high oil prices. Birol told Reuters on December 10 that sustained oil prices -- which were then around USD 89 a barrel -- posed a risk to the recovery. Prices surged to a 27-month high above USD 92 on Monday but fell back below USD 90 on Tuesday. OPEC members have shown little inclination to pump more crude in order to temper the rise in oil prices, but many analysts expect key members such as Saudi Arabia would begin to leak more barrels above official quotas if crude were to rise much higher, effectively preventing another sudden spike. "Oil exporters need clients with healthy economies but these high prices will sooner or later make the economies sick, which would mean the need for importing oil will be less," Birol told the FT. In the very short term, therefore, "it may not be a bad idea that the producers are ready to increase production and show their understanding that these high prices are not good for the global economy," he added.