EC ?oncerned over Economic Impact If Oil Stays over $100/b

Platts, Brussels, Feb 24, 2011
The European Union is not worried about the loss of Libyan oil supplies as it is importing alternative crude from producers such as Saudi Arabia, the European Commission's energy spokeswoman Marlene Holzner said Thursday.

"The EU imports 10% of its oil from Libya. Production has been stopped but the EU is receiving extra supplies from alternative suppliers, such as Saudi Arabia," Holzner told reporters in Brussels.

The head of Italian oil major Eni's Paolo Scaroni said Thursday he believes Libyan oil production has fallen by about 75% or 1.2 million b/d due to ongoing upheaval in recent days in the North African country.

Libya normally produces some 1.6 million b/d of oil and exports about 1.4 million b/d of the total, according to the International Energy Agency.

Brent oil prices jumped to almost $120/barrel early Thursday, hitting a 30-month high, as ongoing Libya instability stoked supply jitters across the Middle East and North Africa.

On the oil price, Holzner said the EU would only be concerned about negative economic impacts if higher oil prices if it remains [sic] over $100/b "for several months," or if it is particularly volatile over several months.

"We are concerned about rising oil prices because of what is happening in North Africa," [EC] Economic and Monetary Affairs spokesman Amadeu Altafaj Tardio said. "When we look at the inflation figures, we see that inflation has been rising and mainly due to the effects of increasing energy prices. The other components are quite stable, [but there is] no doubt that rising energy prices can have an adverse impact on inflation."

"The EC will present its interim economic forecast on March 1, so there will be more comments then and there is a press conference with [economic and monetary affairs] commissioner Rehn on Tuesday," Altafaj Tardio added.

European Union president Herman Van Rompuy early Thursday renewed his call for Libyan authorities to immediately "end the use of force" against protesters. [Full story]

(The International Energy Agency warned last month that sustained oil prices of US$100 a barrel pose a real risk to the world economy. "Were $100/bbl oil to become entrenched in 2011, that would risk pushing the [oil burden] figure through 5%," IEA said in its monthly Oil Market Report (OMR), released on January 18---please read about the oil burden, here. Please see Libya's oil and gas profile, here. -- D.R.)