Oil prices threaten economy, group warns

The high price of oil is threatening the stability of the global economy and should serve as a "wake up call" to oil producers and consumers, the head of an international oil policy advisory group warned Wednesday.

The terse message from Fatih Birol, chief economist at the International Energy Agency, comes on the heels of new findings from the group that suggests oil import costs for member countries of the Organisation for Economic Co-operation and Development were up by some $200 billion US to $790 billion US at the end of 2010.

This, Paris-based IEA warned, was equal to a loss of income of 0.5 per cent of the OECD countries' combined gross domestic product.

"Oil prices are entering a dangerous zone for the global economy," Birol warned in a release. "The oil import bills are becoming a threat to the economic recovery. This is a wake-up call to the oil-consuming countries and to the oil producers."

February crude oil was up $1.15 a barrel at $90.53 by midday.

The IEA, an energy policy adviser for 28 member countries, also found that the European Union's oil import bill grew by $70 billion last year roughly the combined budget deficits of Greece and Portugal.

The high oil prices, Birol argues, stresses the need for oil consuming countries to boost efforts to cut back on the amount they use, especially for transportation.

"It is not in the interest of anyone to see such high prices," he said. "Oil exporters need clients with healthy economies but these prices will sooner or later make the economies sick, which would mean the need for importing oil will be less."

"It may not be a bad idea that the producers are ready to increase production and show their understanding that these high prices are not good for the global economy."