http://www.reuters.com/article/2011/11/24/us-oil-iea-idUSTRE7AN12020111124I believe oil prices are well-positioned today to strangle the economic recovery efforts," he told Reuters on the sidelines of a seminar with the U.N. nuclear agency in Vienna.
Oil prices rose toward $108 on Thursday, helped by bigger-than-expected stock draws in the United States and tensions around Iran's nuclear ambitions, while stronger German data offset some of the negative sentiment generated by Wednesday's poor bond auction.
Birol said Europe was especially at risk from the high oil price, but that it could also turn into a major problem for energy-hungry Asia.
"It is a major risk for the slowdown (of) the economic growth in Asian countries which were the countries which brought us out of the financial crisis in 2008," said Birol, whose organization represents major energy consuming countries.9more)
Given the current level of economic activity, the price of oil shouldn't be more than about $70 a barrel. The reason the price of oil has been pushed up over the last several months is the "Arab Spring". This has introduced a degree of uncertainty re the reliability of the supply of oil from the mid-East. Lately, concerns about Iran have started to add to this uncertainty. Neither of these concerns are going to go away soon and they could become much more serious leading to prices for oil that would make $100 a barrel seem like the "good ol' days".
Ethanol is meeting 10% of our supply of fuel for light surface transportation and in so doing holding the price of oil down at least 15%. This is no time to let the oil companies and their minions in the GOP to sink the ethanol industry (Big Oil is not pleased that ethanol is lowering the prices they can charge by at least 15%. They want to end Ethanol as a competitor and allow only enough ethanol to be made as is needed to replace MTBE. The ethanol industry may be able to get along without the Blenders Credit, but now EXXON Mobil etal are setting their sights on killing the Renewable Fuels Standard set by the Energy Independence and Security Act (2007)).
If oil prices go much higher we can expect to see long term negative impacts on economic growth, job creation and unemployment. This will not do our economy any good and will also make the adoption of other more expensive Green technologies, with longer time horizons, such as electric cars, take even longer to accomplish. IF ethanol production drops too much this would just remove the cushion we now have to possible oil supply constraints, making the price of oil even more volatile than it already is.
We must take advantage of all techniques and technologies available to us for reducing our petroleum consumption in the near term to protect our economy from too rapid increases in oil prices and thus to help insure the adoption of more expensive green technologies as rapidly as possible.
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