The International Monetary Fund flagged higher oil prices as a rising threat to the global economy on Friday, urging policymakers to keep a close eye on western tensions with Iran, which is facing punitive measures against its crude supplies.
Looming US sanctions on Iran’s oil buyers, as well as an impending European Union oil embargo, have forced countries to cut back on purchases from the world’s fifth-largest exporter of crude, pushing up the price of the commodity.
Policymakers from around the globe are converging on Mexico City for a meeting of finance ministers and central bankers from the Group of 20 economic powers, and several of them raised concerns over the spiralling crude costs.
“A new risk on the horizon, or maybe not on the horizon, maybe right in front of us, is high oil prices,” David Lipton, first deputy managing director of the International Monetary Fund, said in a presentation at the G-20 gathering.
“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,” Lipton added, noting, however, that it was too early to revise down the Fund’s growth forecasts. Mexico, which is hosting the G-20 meeting, has been pushing for the eurozone to take further steps to solve the debt crisis and for policymakers to make progress on increasing the IMF’s firepower, lest it be needed to help in Europe. But some countries have said there can be no talk of more IMF resources without a stronger European firewall, which is to be discussed among European Union leaders next week.
Angel Gurria, the secretary-general of the Organisation for Economic Co-operation and Development, said the jump in oil prices were due to politics and would not be solved by releasing reserves. Gurria said there was no distortion in markets and oil prices of up to $100 per barrel were “the new normal”.