Oil prices rise because supply dictates no other option’
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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