Nouriel Roubini, the economist who correctly predicted the global financial crisis, has warned that some advanced economies could experience a double dip recession if the price of oil climbs to $140 a barrel. His comments came in a keynote speech at the MIPIM property conference in Cannes.
The CEO of Roubini Global Economics noted that whilst the current price of oil is a drag on the developed economies, albeit a modest one, it will have a more serious impact on emerging economies where there is a risk of double-digit inflation.
Oil prices tumbled this evening as the US dollar strengthened due to renewed euro zone debt worries, though fears remained that prolonged conflict in Libya could do long-lasting damage to its oil infrastructure.
Data showing that China, the world's second largest oil importer, unexpectedly posted the largest trade deficit in seven years also weighed on oil prices, analysts said.
US crude fell faster than its counterpart Brent crude, down $2.96 to $101.42 a barrel as economic figures from the US raised concerns about growth. In London, Brent dropped $1.75 to $114.19.
The euro fell against the dollar after rating agency Moody's downgraded Spain's credit, sparking negative sentiment towards struggling sovereign borrowers in Europe. A stronger dollar usually makes oil more expensive for holders of other currencies.
Meanwhile, Shokri Ghanem, chairman of Libya's National Oil Corporation, said the country's oil production had been cut to about half a million barrels per day from 1.6 million bpd by the war, as many foreign and local workers left oilfields.
To cool down market anxiety, Saudi Arabia has increased production to nine million bpd, almost one million bpd above its OPEC target. The kingdom says it holds spare capacity of 3.5 million bpd. But an OPEC official said on Wednesday it saw no need for an emergency meeting to discuss raising output.
