Oil price will likely remain at current levels at above $100/barrel for "some time" if a new global economic slowdown is averted in the short term, BP chief economist Christof Ruhl said Wednesday.
"There will be a period of muddling through, but the most likely outcome, if the economy is not collapsing, is for oil prices in the current regions for some time to come," Ruhl told an oil conference in London.
Brent oil prices have stayed above $100/b this year and 2011 is set to become the year with the highest average normal oil prices on record, at above $111/b, Ruhl said.
Even adjusted for inflation, average oil prices in real terms are going to be the highest ever this year, except for in 1864, he said.
"These are very high oil prices, and it's the annual average price -- not a short spike -- which matters for the global economy, so we should not be surprised if we see, at some point, an ugly discussion emerging about this."
Oil prices rose at record rates in 2010 due to the rebound in the global economy, but unlike other commodities, did not slow their pace of growth this year, Ruhl noted.
Ruhl said production level management by OPEC remains the key reason why oil prices continued to find support this year despite growing concerns over a new global recession triggered by a debt crisis in Europe.
"Oil prices have held up because the industry lives under the OPEC umbrella and OPEC has not completely equalised the outages from Libya and because, across the entire [Middle East] region, all of a sudden oil prices are needed for higher budgets and spending," he said.
Faced with continued high oil prices crimping recovery in developed countries, oil consuming nations should be cautions about releasing strategic oil stocks to help deflate pries, Ruhl said.
Oil stock releases such as the International Energy Agency's move this year to replace lost the Libyan production, are more often a "blunt instrument" sometimes motivated by political fear rather than a market need, he said.
"I think it was a signal more than anything and I hope it's not something we'll see on a continual basis, after all it's a reserve for emergency situations," Ruhl said, referring to the IEA stock release in late June.
Ruhl acknowledged, however, that it remains a "very tricky" time for OPEC producers deciding on production levels, as they are faced with potentially raising output to ease prices in face of a possible fresh collapse in demand if the world economy hits a new recession.
