Baku, Azerbaijan, Oct.12
By Leman Zeynalova – Trend:
Higher oil prices hinder oil demand growth, they also make transportation more expensive, which hinders trade and growth in global GDP, Spencer Welch, director of the oil markets and downstream team in the London-based IHS Markit told Trend.
He was commenting on the recent complains by India to OPEC over the higher oil prices.
“President Trump has also complained. OPEC is doing what it can, Saudi has already ramped up rate, as has Russia, to try to compensate for Iran sanctions and Venezuelan decline. Saudi does have the ability to increase further but is concerned that if it increases rate this reduces the global spare production capacity, which is already relatively low, and the low spare capacity could spook the market into a price spike due to unplanned disruption fear,” said the expert.
However, Welch believes that higher oil prices increase oil income for producers, increasing spending power and boosting GDP.
“So there is a balance, however, overall higher oil prices are probably slightly negative in terms of global GDP growth. This is the 50 million dollar question, trying to assess and get to the so called “Goldilocks price” – not too high and not too low,” noted the expert.
Probably above $90/bbl is also a bit high, so around $70-80/bbl is probably the Goldilocks price range, according to Welch.
Several weeks ago, OPEC received a letter from India complaining over the current situation in the oil market, said OPEC Secretary General Mohammad Sanusi Barkindo.
Addressing the briefing as part of the Oil & Money Conference, Barkindo noted that many major oil consumers are not happy with the current prices.
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