MADRID - The steep rise in the oil price since early 2007 has been caused by production and refining constraints and prices could rise further, the Governor of the Bank of Spain Miguel Angel Fernandez Ordonez said on Tuesday.
High oil and food prices could cause a wage-price spiral, said Ordonez, who is a member of the European Central Bank's governing council.
Inflation in the euro zone is likely to stay high for the next months but ease gradually from the end of the year and throughout 2009, but there are upside risks, Ordonez said in a speech accompanying the Bank of Spain's annual report.
"The ECB's governing council will continue to analyze events with maximum attention, at the same time that it remains determined to act to prevent the appearance of risks to price stability," he said.
There was a danger that more expensive oil and food could push up wage claims "unleashing a dangerous spiral of wages and prices," he added.
Ordonez said it was unlikely that energy and food prices would ease in the short term and that the oil market was being squeezed by production constraints.
"The low excess capacity of production and refining is, without a doubt, behind the strong rise in oil prices since the beginning of 2007," he said.
So far, the eurozone economy has proved resilient in the face of global financial turbulence, but there is a great deal of uncertainty over its outlook in the mid-term, he said.
There is also much more uncertainty for the outlook for the U.S. economy than several months ago, Ordonez added.
"We don't know anything more about the behavior of exchange rates and their influence on global imbalances which are still far from corrected," he said.
High oil and food prices could cause a wage-price spiral, said Ordonez, who is a member of the European Central Bank's governing council.
Inflation in the euro zone is likely to stay high for the next months but ease gradually from the end of the year and throughout 2009, but there are upside risks, Ordonez said in a speech accompanying the Bank of Spain's annual report.
"The ECB's governing council will continue to analyze events with maximum attention, at the same time that it remains determined to act to prevent the appearance of risks to price stability," he said.
There was a danger that more expensive oil and food could push up wage claims "unleashing a dangerous spiral of wages and prices," he added.
Ordonez said it was unlikely that energy and food prices would ease in the short term and that the oil market was being squeezed by production constraints.
"The low excess capacity of production and refining is, without a doubt, behind the strong rise in oil prices since the beginning of 2007," he said.
So far, the eurozone economy has proved resilient in the face of global financial turbulence, but there is a great deal of uncertainty over its outlook in the mid-term, he said.
There is also much more uncertainty for the outlook for the U.S. economy than several months ago, Ordonez added.
"We don't know anything more about the behavior of exchange rates and their influence on global imbalances which are still far from corrected," he said.
