Summer demand could send oil prices spiking and trigger a global recession, IEA chief warns

Fatih Birol, head of IEA
Fatih Birol warned summer could be difficult for energy markets.Anadolu Agency/Getty Images
  • A rise in energy demand in the summer could send prices higher and risk a global recession, the head of the IEA has warned.

  • Fatih Birol told Bloomberg TV that all players in energy markets should make a "positive contribution" to avert price rises.

  • Energy prices have risen sharply in 2022 after Russia — a major supplier — invaded Ukraine in late February.

A rise in energy demand during the summer could send oil prices even higher and push the world economy into a recession, the head of the International Energy Agency has warned.

Fatih Birol told Bloomberg TV on Monday that all players in energy markets need to make a "positive contribution" to ensure that prices don't spike.

His comments come in the context of a sharp rise in global energy prices as a result of Russia's invasion of Ukraine. Western countries are trying to cut their reliance on Russian energy, with the European Union trying to reach an agreement on a total ban of oil imports from the country.

Birol said these efforts were necessary to punish Russia, but warned they increased the risks for energy markets and the world economy.

"This summer will be difficult because in summer, as we know, the oil demand normally goes up in peak driving season," Birol told Bloomberg TV during an interview from the World Economic Forum's meeting in Davos, Switzerland.

In the US, gasoline prices are set to hit $6 a gallon on average at the pump as the summer driving season kicks off, according to a projection by JPMorgan.

Birol called on "everybody in the global energy markets" to do what they can to keep a lid on prices.

"If you don't make a positive contribution here, we may see prices even going higher, being much more volatile, and becoming a major risk for recession for the global economy."

He said other suppliers such as the US, Brazil and Canada may not be ready by the summer to step in to fill the gap left by countries pivoting away from Russian oil.

The IEA chief also said Russia would likely have difficulty shifting its exports away from Europe and towards Asia, because of the big increase in traveling distances.

Oil prices have risen sharply since Russia — one of the world's key energy suppliers — invaded Ukraine in late February.

Brent crude oil was up 1.06% Monday to $113.74 a barrel, having started the year below $80. WTI crude was 0.91% higher at $111.28 a barrel.

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