High oil prices threaten to sap the energy from an economic recovery in the US, the world's biggest oil guzzler, experts said Wednesday.
The US economy -- accounting for more than one quarter of global oil demand -- is emerging from recession at a faster clip than analysts had expected, noted Standard and Poor's chief economist David Wyss.
"There remains, however, a significant risk that the economy will dip back into recession," Wyss said in a report.
"The most likely cause would be an external shock, whether in the form of another terrorist attack or an expanding conflict in the Middle East, which could send oil prices higher."
In New York, light sweet crude for May delivery fell US$0.15 to close at US$27.56 a barrel after reaching a six-month high the previous day due to the Middle East crisis.
Prices remained too high, however, said George Gaspar, managing director of petroleum research at Robert W Baird and Co, a Milwaukee-based investment bank.
"I think oil prices at this point are a good four dollars above where they ought to be," he said, blaming the Middle East and a widely discounted Iraq-Iran threat to halt oil exports to the US.
High prices coincided with early signs of rekindled oil demand, Gaspar said, forecasting a net increase in global demand of 500,000 barrels per day -- just 0.7 percent up from last year.
"I am very concerned, though, that the tremendous surge in oil prices is going to short circuit not just the US economy but could short circuit the world economy from recovering to the extent that is envisioned at the present time," Gaspar said.
In the early stages of a US economic recovery, West Texas oil prices above US$22.50 to US$23.00 a barrel represented a threat, Gaspar said. As the economy gathered strength over the next six months to a year, it could probably take a price of around US$25 a barrel.
But anything above US$28 a barrel for West Texas Intermediate oil was a longer-term menace to the economy.
"The price like it is now -- the WTI above 27 -- that is way ahead of schedule. There is not any question that that is the kind of thing that can work against the economic recovery," Gaspar said.
"It will delay the momentum that appears to be regenerated in the US economy at this point in time."
The US economy is supplied with about 19.5 million barrels per day, of which 54 percent is imported.
Analysts have largely discounted concerns about the Iraq-Iran threat to squeeze off US supply, noting that they would be unlikely to carry other Organization of Petroleum Exporting Countries members with them.
But "we believe rising energy costs are a risk very worthy of monitoring right now, particularly because of the recent forces driving them higher," said SalomonSmithBarney economist Steven Wieting.Also See Story:
OPEC says it won't raise output to reduce prices
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