World economic recovery needs lower oil prices: CGES

24th May 2010, Comments 0 comments

The global economic recovery would benefit from a period of oil prices at below 80 dollars given the growing risk of a fall back into recession, the Centre for Global Energy Studies said on Monday.

OPEC favours oil at around 80 dollars as fair to producers and consumers but the "global economic recovery, and with it the long-term health of the oil market, would both benefit from a period of more moderate price aspirations," CGES said in its latest monthly report.

London-based CGES said that in the space of four weeks, optimistic views on the economy have "reversed and the market now seems fixated on the risks of a double-dip recession."

Oil prices are down 17 percent over that period, with the eurozone debt crisis raising tough questions about the impact on the economy as governments slash spending to balance their books.

All markets have sold off over the past few weeks on concerns that European growth could falter, triggering a return to recession that would undercut growth elsewhere.

Asia, led by China, has enjoyed strong growth and has been a key player in oil price gains as a result but "questions are beginnning to be raised as to whether this is sustainable in the absence of a recovery the region's main export markets in Europe and North America."

CGES noted that China's growth has been driven largely by government stimulus measures aimed to combat the global slump but Beijing has been reining in some of this to avoid the economy overheating.

"A slowdown in the rate of Chinese economic growth would remove at a stroke the single largest support of oil demand," CGES said.

The consultancy said that the eurozone debt crisis has clearly seen the markets take fright given the possible fallout it could have.

© 2010 AFP

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