MercoPress. South Atlantic News Agency

Record oil prices set to chip 0,8% from world growth

Record oil prices will cut world economic growth by 0,8% this year and will increase the gap between rich and emerging countries according to the International Energy Agency chief economist Fatih Birol.

"If this year the average oil barrel price reaches 50 US dollars the world's economy expansion will be cut by 0,8%", said Birol.

World oil prices have reached nominal record prices following concerns over Iran's nuclear development program, (which happens to be the world's second producer behind Saudi Arabia), refinery production cuts in the US and growing demand from China, India and the expanding US economy.

In 2004 as predicted by the International Energy Agency, following on data from the World Bank and IMF, the average oil barrel price of 43,5 US dollars chipped half a point from the world's growth. But this year the oil barrel is already averaging 53 US dollars.

The new oil facilities which are expected to begin production in early 2006 will help supply but won't be enough for the overall demand in the short term predicts Birol.

"We can expect a 2 to 2,5 million barrels per day increased production by June 2006, but this will have a limited impact on prices".

"And if this forecasted production increase from Saudi Arabia, Brazil, Gulf of Mexico and West Africa doesn't keep to schedule, oil prices will most probably continue to surge because of the heavy demand for heating oil in the northern hemisphere", added the IEA economist.

Besides increased demand, the oil market faces insufficient heavy oil into light derivates refining capacity.

Last week IEA cut 20,000 barrels from the daily demand increase for the rest of 2005 to 1,6 million bpd; however for 2006 it added another 30,000 bpd to the expected daily increase of 1,78 million bpd.

High oil prices are considered responsible for a less than expected expansion of the US economy and for a contraction in several European Union members as well as growing current account deficits in emerging countries.

"Countries such as Turkey are under strain because of high oil prices", indicated Biral.

China, another factor in the oil market currently consumes three million bpd and by 2030 is expected to reach US demand, the highest in the world, 11 million bpd.