• Home
• Oil & Gas
• News Article

2nd UPDATE: BP CEO: US Economy Endangered By High Oil Price

Tuesday, Dec 06, 2011

(Adds more detailed BP comment throughout.)

DOHA -(Dow Jones)--The health of the U.S. economy is under threat from high oil prices and the rest of the world should be concerned about the wider consequences if it does suffer damage, BP PLC ( BP ) Chief Executive Robert Dudley said Tuesday.

"There is a risk that the world's largest economy...could be hit by a lack of supplies and a high price of oil, with consequences for the recovery elsewhere in the world," said Dudley at the World Petroleum Congress in Doha, Qatar.

At the current oil price, which is around $100 a barrel for U.S. crude benchmark West Texas Intermediate, is just a fine line away from economic damage, he said.

Dudley was speaking just a day after several officials from members of the Organization of Petroleum Exporting Countries said they were satisfied with current oil prices and were likely to maintain current oil supply levels at a meeting in Vienna next week.

"It's impossible to say exactly what price will affect the economic recovery, but we do know which regions will be affected most. It is the U.S.," said Dudley.

The U.S. is first to feel the effect of high prices, "because it has a low tax buffer between crude prices and prices at the pump," said Dudley. "High oil prices translate almost one-for-one into higher gasoline prices for consumers and this leads to lack of demand for other goods," he said.

"Average U.S. consumers are on track to spend $200 billion more on oil this year than they did in 2010 due to the higher crude prices," Dudley said.

The reverberations of this are felt throughout the world, Dudley said. "We live in an interconnected world where a downturn in the U.S. affects goods and services from China, India and indeed this region [the Middle East], particularly if energy demand is affected."

Nevertheless, Dudley expected oil prices to remain high, driven by demand growth in emerging economies. "We see demand still holding up in Asia, so we're planning this year on $90 to $100 a barrel. It looks like its a fairly solid floor for this year," he said.

Some OPEC member, notably Iran, have been keen to prevent oil prices falling too much. OPEC will discuss next week how Gulf countries, who increased their production over the summer to offset the loss of Libyan oil exports, can cut back their output as Libya returns to normal, said Iran's Oil Minister Rostand Ghasemi Monday.

-By James Herron, Dow Jones Newswires; +44 207 842 9317; james.herron@dowjones.com

(END) Dow Jones Newswires

06-12-11 1116GMT