The head of the International Energy Agency (IEA) has told a major news gathering agency that the world would receive the equivalent of a US$1 trillion stimulus if the price of oil continued to hover around the $40 mark.
Nobuo Tanaka, executive director of the IEA, told Reuters that the world economy was now being propped up by the low cost of fuel. He also warned OPEC to be cautious in regards to cutting oil supplies.
“Mutual interest for producing and consuming countries is economic recovery, so maintaining this kind of stimulus is certainly very helpful,” Tanaka said.
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 March 15.
“Watch carefully the market and make proper decisions,” he said at a London conference hosted by research group New Energy Finance.
Tanaka had calculated the savings using the average 2008 oil price of $100 and the current price of $40. He also said that even though he believed it natural to cut production if demand declined, a lack on investment by OPEC could result in the group’s unused oil capacity shrinking. This could result in another price spike, which seen oil prices hit $147 in 2008.
“To the end of 2013 currently we see spare capacity of about 3.5 million bpd. But that number could be much, much smaller. It could be 2 or 3 million bpd lower toward 2013,” Tanaka 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.”
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