Speaking out: Nobuo Tanaka
$40 oil 'a boost for global economy'
The world economy will effectively receive a $1 trillion stimulus if oil prices stay around $40 a barrel for the rest of this year, the head of the International Energy Agency (IEA) said today.
The IEA's director Nobuo Tanaka made the claim in an interview with the Reuters news agency.
Lower fuel bills were now supporting an ailing world economy, and Tanaka urged the club of oil exporters, Opec, to be cautious before cutting oil supplies at a meeting on 15 March.
Oil prices have fallen from a record high of nearly $150 a barrel struck last July and have since mid-December traded in a narrow band near $40, caught between slumping demand and the possibility of further Opec output cuts.
"Watch carefully the market and make proper decisions," Tanaka urged Opec, speaking on the sidelines of a London conference hosted by research group New Energy Finance.
"Mutual interest for producing and consuming countries is economic recovery, so maintaining this kind of stimulus is certainly very helpful," he said of an estimated $1 trillion boost in lower energy costs.
Tanaka said it was natural to cut production if demand declined, but would not comment on whether the IEA would further cut its forecast for global oil demand in its monthly oil market report on Friday next week.
Tanaka urged producers to invest in new production now to avoid a repeat of last year's oil price spike.
A lack of investment now by Opec could shrink the group's unused oil capacity by 2013, threatening a repeat price surge, he said.
"To the end of 2013 currently we see spare capacity of about 3.5 million (barrels per day). But that number could be much, much smaller. It could be 2 million or 3 million bpd lower towards 2013," he said.
"We may have a supply crunch around 2013, that is our serious concern. The same thing as last year could happen around that time if investment is not really happening."