Turmoil in Libya is threatening economic recovery as oil prices hit their highest level in years, the International Energy Agency (IEA) has warned.
The
IEA said that the rise in
oil prices could weaken trade, increase inflation and potentially cause banks to raise their interest rates, all of which could set back
economic recovery.
Unrest in Libya has prompted foreign oil companies to evacuate their employees, which has contributed to the rise in prices. Brent crude oil reached its highest cost since 2008 at £67.24 ($108.57) a barrel.
"Oil prices are a serious risk for the global economic recovery," IEA’s Fatih Birol said in a
Guardian report. "The global economic recovery is very fragile – especially in OECD countries."
Libya exports about 1.6 million barrels of crude oil each day, about 85 per cent of which is sent to Europe.
Emergency measures
According to Birol, in order to meet oil demands, IEA members are considering an effort to release oil from their emergency reserves. Saudi Arabia will produce more oil if it’s deemed necessary.
Julian Jessop from Capital Economics told the
Guardian that countries shouldn’t panic over the rising prices. "First, although Libya is an Opec member, it is still a relatively small player. Libya's usual daily production of 1.6 million barrels ranks the country at around number nine of the 12 members. In principle, any shortfall on global markets could easily be offset by an increase in output from Saudi Arabia, which is currently producing some three million barrels per day less than its estimated capacity (though this additional supply cannot be turned on overnight)."
One of the concerns, however, is that violence in Libya may spread to other oil-producing countries, thus making economic recovery even more difficult.
Clean energy investment
But while the events in the Middle East are leading to oil price rises and growing concerns about energy security, they are also expected to increase the demand and value of
investment in clean energy. Global
investment in clean energy saw a 30 per cent surge in 2010, according to figures released last month by
Bloomberg New Energy Finance.
Energy ministers from countries that are top oil producers and consumers will attend a meeting on Tuesday in Riyadh.
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