Oil price may hit $150

The world's leading energy thinktank has warned that oil prices could spiral above $150 (£93) a barrel in the short term if political unrest in Africa and the Middle East leads to inadequate investment over the coming years. Despite a drop in the cost of crude on 9 November prompted by the deepening crisis in the eurozone, the Paris-based International Energy Agency (IEA), said the high cost of crude posed a threat to the global economy and said there was a risk of prices exceeding the previous peak of $147 a barrel seen in 2008. "In 2011, $102 is the average price through to today which means the global economic recovery is at risk. We are in the danger zone for the global economy at current levels," IEA economist Fatih Birol told a news conference. "There is a possibility that production growth from the Middle East and North Africa (Mena) region may not be what the consumers would like to see. This would be a pity for the global economy, a pity for the oil sector and a pity for those governments." Birol's comment followed the release of the IEA's annual World Energy Outlook, which said that if investment in the Mena region runs one-third lower than the $100bn a year required between 2011-2015, consumers could face a near-term rise in the oil price to $150 a barrel. The thinktank is expecting demand for energy to grow by a third between 2010 and 2035, with two thirds of the increase coming from the fast-growing emerging countries, and says enormous investment in exploration, drilling and refining will be needed for supply to keep pace. Fears that the outlook for global growth will be affected by Europe's sovereign debt problems prompted oil prices to fall by $2 a barrel as dealers anticipated weaker demand. Analysts said the fall would have been larger had it not been for the ratcheting up of international pressure against Iran over its nuclear programme. A barrel of Brent crude was changing hands for little more than $113 a barrel in the global commodity markets. "People are scared that Italy's too big to bail out," said Michael Hewson, analyst at CMC Markets. "It's driving people out of risky assets and it's reinforcing fears about a double-dip recession, which will hit demand-sensitive assets like oil." The IEA's gloomy assessment of the outlook for the price of oil was rejected by the 12-nation oil cartel, Opec, which said that there were downward pressures on the cost of crude. Opec has signalled that it sees no need to announce a boost to oil supplies at its meeting next month, despite calls from developed nations in the west for lower prices. Opec, which produces every third barrel in the world and has faced unprecedented unrest across its members this year, said in its monthly report on Wednesday it was not overly concerned by under-investment by its member countries in light of current oil prices and large increases in public spending. "It is expected that economic growth in 2012 in the Mena region will be stronger than in 2011, mainly due to the massive infrastructure and industrial developments in Saudi Arabia, and robust growth in Iraq," it said. The IEA also said time was running short for governments to meet their goal of limiting the temperature rise to 2C. "If, as of 2017, there is not the start of major and clean new investments, the door to 2C will be closed," Birol said. "There is a need for an international legally binding agreement to put a price on carbon, to put in place some new regulations ... If we look at the current state of climate talks and ... the financial crisis, it is difficult to say the wind is blowing in the right direction," he added.