PARIS, Mar. 1, 2011 (Xinhua News Agency) -- High oil prices driven up by recent Libya situation has become a growing risk and is likely to "weaken the still-fragile economic recovery," Chief Economist of the International Energy Agency (IEA) Fatih Birol said Tuesday.
"Europe, especially Italy, France, Germany and Spain, are particularly vulnerable as the region receives over 85 percent of Libyan crude oil exports," the chief economist told Xinhua in an interview, adding that "Europe is also one of the weakest links in the global economic recovery."
High oil prices could turn into negative factors "damaging trade balances, reducing household and business income, putting upward pressure on inflation and interest rates," and ultimately "dampening economic growth," Birol said.
In an earlier report of The Wall Street Journal, the IEA senior official estimated if the oil price averages 100 U.S. dollars a barrel this year, the United States would have to spend 385 billion U.S. dollars on oil imports, nearly 80 billion dollars more than last year, while the European Union would have to spend 375 billion dollars, 76 billion dollars more than last year.
Last week, the oil price reached its highest level in over two years. Brent was traded at 115.42 dollars a barrel on Tuesday, while U.S. crude settled near 100 dollars.
According to Birol, present concerns are still early to form final judgment. "The situation is evolving rapidly," he said. "We will have to reassess the situation if the supply outage worsens or if it persists for a long duration."
"For the near term, the loss of supply can be managed through flexibility in the refining system and by diverting crude oil supplies," he said, citing Saudi Arabia as a praiseworthy role, which has reportedly expanded its crude output to over 9 million barrels a day.
"Saudi Arabia in particular is doing an excellent job, showing once again that when needed it is prepared to play the role of central banker and make oil available," he said.
In a hope to ease the potential oil panic, Birol highlighted the IEA stocks and its preparation. "The IEA is in a state of constant readiness and is prepared to step in if necessary. Collectively, the IEA members hold enough crude oil in emergency stocks to provide 4 million barrels a day to the market for a year."
According to an IEA assessment last Friday, the situation in Libya, the world's 13th largest oil exporter, has cut its oil production by 0.85 million barrels a day from around 1.6 million barrels a day.