Oil prices rise be­cause sup­ply dic­tates no other op­tion’

The Weekend Australian - Travel - - Resources -

OIL mar­kets are ‘‘ stressed’’ by a lack of sup­ply that’s ex­pected to con­tinue for the fore­see­able fu­ture, the In­ter­na­tional En­ergy Agency’s deputy ex­ec­u­tive di­rec­tor says.

Oil is a ‘‘ com­mod­ity un­der stress,’’ Bill Ram­say said at a con­fer­ence in Paris. ‘‘ Prices are go­ing up be­cause there is no other op­tion. There is not enough spare ca­pac­ity through­out the sys­tem.’’ Crude fu­tures in New York reached a record this week and have dou­bled in the past year.

The IEA, founded in 1974 in re­sponse to an Arab oil em­bargo, said in Novem­ber that Chi­nese and In­dian crude oil im­ports would al­most quadru­ple by 2030 to 19.1 mil­lion bar­rels a day, help­ing to cre­ate a sup­ply ‘‘ crunch’’ as soon as 2015.

Still, record oil prices are ex­pected to hurt de­mand, Ram­say says. Oil de­mand is drop­ping in na­tions be­long­ing to the Or­gan­i­sa­tion for Eco­nomic Co-op­er­a­tion and De­vel­op­ment, and is likely to fall in emerg­ing coun­tries as gov­ern­ments move to dis­man­tle state sub­si­dies de­signed to cush­ion lo­cal pop­u­la­tions from high prices.

Past moves by In­done­sia to raise prices low­ered de­mand by 300,000 bar­rels a day, Ram­say said. ‘‘ Th­ese so­cial pro­grams are de­signed to pro­tect frag­ile con­sumers. Price rises will be be­yond what they can pay.’’

Fi­nan­cial de­mands on gov­ern­ments are prov­ing to be too much in the face of record oil prices, he says. ‘‘ Coun­tries are hav­ing to take money away from health, ed­u­ca­tion and other pro­grams to pay for oil im­ports.’’

Fore­casts of lower de­mand will be in­cluded in the next edi­tion of the or­gan­isati­ion’s an­nual WorldEn­ergy Out­look to be pub­lished in Novem­ber, he said.

The fact that some peo­ple in emerg­ing coun­tries will no longer be able to af­ford fuel ‘‘ will show up’’ in the IEA’s fore­casts, Ram­say said. Bloomberg

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