OPEC output should increase to halt higher oil prices – IEA

6 January 2011 6 January 2011

BonTrade

The IEA’s chief economist has suggested that OPEC will need to raise it’s crude oil output this year in order to halt higher oil prices and in turn, help any global recovery in 2011.

Fatih Birol, the IEA chief economist said that oil prices are entering a dangerous zone for the global economy, while interviewed with the BBC.

The IEA warning coincides with oil prices rising to their highest level in more than two years this week, as investors bet that oil futures will tip over $100 a barrel in 2011.

Oil Prices Affecting Inflation

“Oil is one of the most important inputs to the economy. If the oil prices go up much higher than what we have been seeing in the markets, this would mean that the budget of the households in terms of more expenditure for traveling or for other energy purposes, this would mean that their income will be less, and there will be a stronger pressure on the inflation numbers.” said Fatih Birol, speaking to the BBC.

“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.

OPEC nations benefit from higher oil prices and can reduce production to keep demand strong. However, the IEA warned that the cost of importing oil was now so high for consuming nations that it risked damaging growth in those economies, which would reduce demand overall.

OPEC member countries are currently due to stage their next oil output meeting until June 2011.