Rising oil prices 'will force economies into recession'
NOURIEL Roubini, the Turkish-born economist nicknamed Dr Doom, said an increase in oil prices to $140 a barrel will cause some advanced economies to slide back into recession.
Underlying how fragile the global economic recovery is, Mr Roubini said the European Central Bank might be making a mistake by raising interest rates "too soon" when debt-ridden countries on the euro region's periphery struggled to restore the competitiveness of exports.
"If you have the oil price going up to where it was in the summer of 2008, at $140 a barrel, at that point some of the advanced economies will start to double dip," he said yesterday. That wouldn't happen in the US because growth was so strong, he added.
Popular revolts sweeping the Middle East and North Africa, home to more than half of the world's proven oil reserves, have pushed Brent crude-oil prices higher. Brent crude rose for a second day yesterday to surpass $116 after forces loyal to Libyan leader Muammar Gaddafi bombed oil industry infrastructure, inflicting longer-term damage on the country's exporting capacity.
Mr Roubini, an economics professor at New York University, recently said spikes in energy prices related to wars or conflict in the Middle East preceded three of the last five global recessions.
Oil prices at their current levels wouldn't lead to a "significant" acceleration in inflation in advanced economies because they were recovering from a "severe recession", Mr Roubini (52) told a conference on hedge funds. Mr Roubini, known for predicting the credit crisis before 2007, said yesterday that the global economy would continue to face pressures.
"There are many positives in the global economy but significant uncertainties still remain," Mr Roubini said. "For the next few years, we will be living in a world where these uncertainties may have a negative impact on the economy and financial markets."
Mr Roubini was speaking as the Central Statistics Office here released new inflation figures, which showed that prices rose at the fastest monthly rate in almost three years last month as energy prices and health insurance soared.
Transport costs climbed by 0.7pc, with petrol prices up 1.1pc and air fares jumping 21pc.
ECB president Jean-Claude Trichet said last week that the bank might boost borrowing costs as early as next month to fight increasing price pressures even as governments from Spain to Ireland struggled to lower their budget deficits and revive economic growth.
"My view of it is that the ECB is worrying too much about inflation," Mr Roubini said.
The economist says inflation in some emerging economies "where monetary policy is behind the curve" risks going "out of control, in some cases to double digits," unless central banks start raising interest rates soon or use exchange rates to stabilise prices.