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Geithner: World in 'Stronger Position' to Handle Oil-Price Jump

Wednesday, 23 Feb 2011 11:31 AM

U.S. Treasury Secretary Timothy Geithner said the economic recovery has put the world on a better footing to withstand the increase in oil prices caused by turmoil in the Middle East.

“The economy is in a much stronger position to handle” rising oil prices, Geithner said today during a Bloomberg Breakfast in Washington. “Central banks have a lot of experience in managing these things.”

Political turmoil in Libya, holder of Africa’s largest oil reserves, will add “stagflationary winds” to the global economy, according to Mohamed El-Erian, chief executive officer at Pacific Investment Management Co.

Protests in Libya pose more “systemic” risk to the global economy than the upheaval in Egypt and Tunisia, El-Erian said in a Bloomberg Television interview yesterday.

Oil prices rose for a fifth day, approaching $100 a barrel in New York, as Libya’s uprising threatened to disrupt crude exports. Libyan leader Moammar Gadhafi vowed yesterday to keep fighting the rebellion with a crackdown that Human Rights Watch says has left almost 300 people dead.

The risk of higher fuel prices is that they may leave consumers less to spend on other goods, hurt corporate profits and force central banks to raise borrowing costs to curb price increases.

Analysts at Morgan Stanley say sharp increases in oil prices pose the biggest threat to growth because consumers suffer a sudden hit to purchasing power. They note a 85 percent to 90 percent increase in the price of oil over a year was followed by U.S. recessions in 1975, 1980, 1990, 2000 and 2008.

Bahrain, Iran

Political unrest that has swept from Tunisia to Yemen, Algeria, Bahrain and Iran in the past four weeks is fanning oil’s advance at a time when the global economy is emerging from the deepest recession in more than 50 years.

The U.S. economy is projected to grow 3.2 percent in 2011, the most in seven years, according to the median forecast of 61 economists surveyed by Bloomberg from Feb. 2 to Feb. 8.

“The economy is gradually getting stronger,” Geithner said today, adding “I wouldn’t get carried away with it.”

U.S. consumer confidence rose to its highest level in three years this month.

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U.S. Treasury Secretary Timothy Geithner said the economic recovery has put the world on a better footing to withstand the increase in oil prices caused by turmoil in the Middle East. The economy is in a much stronger position to handle rising oil prices, Geithner said...
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2011-31-23
 

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