The era of cheap oil is over and a combination of underinvestment in production and a faster-than-expected recovery could push prices high, the chief economist of the International Energy Agency said Wednesday.
The era of cheap oil is over and a combination of underinvestment in
production and a faster-than-expected recovery could push prices high, the
chief economist of the International Energy Agency said Wednesday.
"The era of cheap oil is over. We have to get used to higher oil prices
even if there is no crisis or crunch," Fatih Birol said at the annual
forum of the Organization for Economic Co-operation and Development in
Paris
.
Birol said that oil production in non-Organization of Petroleum Exporting
Countries is reaching a peak and the bulk of oil predication growth will have
to come from a few countries in the
Middle East
.
If there is a lack of investment in production and a stronger-than-expected
economic recovery in such oil demand centers as
China
,
India
and
the
Middle East
, prices will rise significantly, Birol said.
"If these two marry in two years' time--strong real demand growth and lack
of investment in production--in 2013, 2014 we may well see higher prices than
we have seen in the recent past," he said.
If oil prices did get very high, the still-fragile economic recovery would face
the risk of being strangled, he added.
"Oil was at $87 a couple of weeks ago. It may go beyond that...depending
on how strong the economy will recover and how the insufficient investment in
oil upstream will contribute," he said on the sidelines of the conference.
Recent declines in the oil price reflected the weakness of the economy and
economic expectations, especially in the euro zone, Birol said. A recovery in
prices will depend largely on what happens on the economic front, he said.
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