Inadequate investment in oil production in the Middle East and North Africa is threatening to push prices as high as $176/barrel in 2013 - rivalling the peak prices seen in the months before the global financial crisis struck in 2008.
Taking inflation into account, that price of $176/barrel would be the equivalent of $150/barrel today, a real increase of about 50% from the $102 average for 2011 to date.
International Energy Agency chief economist Fatih Birol, in London to present the IEA's World Energy Outlook report for demand and production through 2035, warned that regional politics could easily divert investment away from oil production to social or other security needs. IEA estimates see the MENA region having to invest $100 billion annually in new production during 2011-2015 to keep up with growing global demand - but if it misses that target by one-third, which Birol believes is possible, then prices will surge.
The IEA has not specifically studied the impact on global economic recovery of a price spike to $176, but Birol noted that the 2008 average price of $100 represented an import burden of about 5% of global GDP. At $102 today, he said, economic recovery "is in a danger zone". An oil price rise towards $176 "is a very risky scenario".