alert after alarming language by the new hardline leader of
Iran, and fresh warnings that the price of oil could soon reach $100 a barrel. Crude reached historic highs of $60 dollars a barrel last week, causing a sell-off in global equities. Daily Telegraph
By Ambrose Evans-Pritchard
Crude reached historic highs of $60 dollars a barrel last week, causing a sell-off in global equities.
With growing demand from China and India stretching oil production to the limit, even marginal threats to long-term supply are driving speculation on the oil futures markets.
EU and Asian finance ministers meeting in China called on Opec to boost output.
Iran’s president Mahmoud Ahmadinejad, an Islamic fundamentalist who was elected last Friday, has called for a radical shake-up of the country’s oil industry and a crackdown on foreign companies. Domestic firms will be given priority in awarding contracts.
“I will cut the hands off the mafias of powers and factions who have a grasp on our oil, I stake my life on this,” he said. “People must see their share of oil money in their daily lives.”
He backed away from earlier threats to shut down Teheran’s “ungodly” stock exchange, but still plans to slash interest rates and give the poor large holdings of state enterprises.
Critics warn that he is in thrall to medieval economics and could stymie plans to boost crude oil production. Iran’s oil reserves are the second biggest in the world.
“There are quite a few very extreme people around him. He might set back the oil sector,” said one oil analyst in Tehran.
Mr Ahmadinejad’s election raises the risk of a major clash with Washington over nuclear policy, spelling further uncertainty for the Gulf region.
In Germany, the respected Kiel Institute for World Economics warned that oil could reach the trauma levels of $100 a barrel if there is further supply disruption in Russia or a political upset in Saudi Arabia.
IFW said a number of “unwelcome developments” could trigger an oil crisis, given limited stocks and lack of capacity to offset a sudden supply shock.
It cited the risk of unrest spilling over from Iraq into Saudi Arabia and called on governments to take evasive action by reducing dependence on cars and developing alternative energy sources.
The warning came as the EU’s economics commissioner, Joaquín Almunia, admitted that the eurozone faced yet another downgrade to its 2005 growth estimate after the latest surge in crude costs.
“If the oil price remains around current levels, $60 dollars a barrel, I presume our forecast will be reduced,” he said.
Brussels has already slashed its growth estimate from 2.0pc to 1.6pc in April after the eurozone’s fragile recovery sputtered out over the winter.
There is a risk that growth could ultimately fall to below 1pc, including a deep slump in Italy.
World central bank chiefs meeting at the Bank for International Settlements also grappled with surging oil prices over the weekend, though the chief focus continued to be the growing US current account deficit, now far into the danger zone at 6.4pc of GDP.
The BIS has warned of risks to the global monetary system as the US Federal Reserve edges back towards “neutral” interest rates after a long phase of ultra-lax policy that has fuelled a series of global asset and property booms through excess liquidity creation.
