IEA data show high oil costs hurting EU consumers
LONDON -- Early data show that high oil prices in Europe have already started to eat into consumer spending in other areas of the economy and could push the region back into recession, said the chief economist of the International Energy Agency, Fatih Birol, on Monday.
The European Union will spend an estimated $502 billion on energy imports in 2012, compared with $472 billion in 2011, said Birol in an interview with Dow Jones Newswires.
A further $100 billion will go on imports of natural gas, the price of which is indexed to oil, he said.
This means that energy costs could eat up almost double their typical share of Europe's income this year, a situation the economy is ill-equipped to handle given its other weaknesses, Birol said.
The IEA, which represents the interests of major energy-consuming rich countries, has repeatedly expressed concern in recent weeks about the impact of high oil prices.
Birol's comments Monday are the sharpest warning yet about the consequences of $120/bbl oil.
"Historically in Europe, a family on average paid 6% to 7% from its pocket for heating, cooking and transport. If oil prices remain at $120 a barrel, this may go to 11%," Birol said.
"The share of money consumers are paying for energy bills is growing, therefore they are trying to reduce spending on food, entertainment and other things," Birol said. "The data points definitely indicate a negative impact," from this on the wider economy, he said.
"If this situation took place in a normal year...it wouldn't be such a major problem," Birol said. But now, as Europe is only just recovering from the 2008 recession and its debt problems, "it could really push countries back into recession," he said.
The major world economies, including Europe, the US, China, Japan and India will spend an estimated $1.5 trillion on oil imports this year, Birol said.
The economic burden of high energy costs has become highly contentious, particularly as the prices of road fuels in many European countries have surpassed their all-time highs in recent weeks.
Even major oil exporters like Saudi Arabia have said that current prices are too high.
The mounting political pressure from high end-user fuel prices has prompted speculation that some countries could dip into their emergency stocks of oil in an attempt to reduce prices.
Earlier this month, President Barack Obama and UK Prime Minister David Cameron agreed to keep open discussions about a possible release of oil held in emergency stockpiles.
Last week, French Energy Minister, Eric Besson, said his country was also mulling fighting high prices with a release of strategic oil stocks.
A stock release of this kind doesn't appear to be imminent. "As no specific supply disruption is currently underway, we are not planning any coordinated actions at the present time," and haven't discussed specific plans for a stock release with any country, said IEA executive director Maria van der Hoeven last week.
Dow Jones Newswires
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