As debt crisis and economic turmoil sweep across Europe, the International Monetary Fund has identified another looming threat to global economy; rising oil prices. The fund strongly suggests monitoring tension between Iran and the Western world.
The United States have sanctioned Iran’s oil consumers, and the EU is considering an embargo as well. Seeing as Iran is one of the top five oil exporters in the world, the resource’s price has risen significantly in recent weeks.
Officials from around the world participated in a meeting in Mexico City, where central bankers from the Group of 20 and finance ministers discussed the price increase and the issues it will potentially cause.
Concerns are strengthened by a Tehran threat to block the Strait of Hormuz, which is the main shipping lane of oil through the Gulf.
IMF First Deputy Managing Director David Lipton said “A new risk on the horizon, or maybe not on the horizon, maybe right in front of us, is high oil prices.The situation in Iran is a risk that we have to be thinking about. Our assessment is that the global economy is not really out of the danger zone,” he continued.
Timothy Geithner, U.S. Treasury Secretary, revealed that Washington is considering using the U.S. oil reserve in order to alleviate some of the global pressure. However, Organization for Economic Cooperation and Development Secretary-General Angel Gurria said the oil prices rise is related purely to politics. Reserves, he said, will do little to remedy the issue.
“There is a lot of tension, these discussions every day over the Straits of Hormuz and Israel,” Gurria said, stating that the $100- a-barrel prices are the “new normal.”
“We are not seeing a situation today where there is something wrong with (market) fundamentals; in fact, we are seeing a slowdown in the global economy. There should be a reduction in consumption,” he said.
Sorry, comments are closed for this post.