MercoPress. South Atlantic News Agency

OPEC: Gasoline prices increasing double the crude rate

The Organization of Oil Exporting Countries, OPEC, warned Wednesday about the growing divergence between crude and gasoline prices, which in the soaring last two years have seen the fuel advance twice as fast.

OPEC's monthly report released in Vienna estimates world oil demand growth will slow down slightly in the coming months, but emphasises in recent "developments involving gasoline and crude prices".

"The relation between crude prices and gasoline has diverged in the last two years", point out OPEC experts. While from the end of 2001 to the last quarter of 2004 the price of Texas Intermediate, WTI, (US reference oil) and the price of gasoline climbed almost parallel, beginning 2005 until now, gasoline has become considerable more dear than crude".

"Between the beginning of 2004 and last July, crude prices increased 50%, approximately 26 US dollars the barrel, in the same time gasoline in the US climbed 90% equivalent to 46 US dollars".

United States gobbles 25% of the world's crude and 40% of gasoline.

This reflects that "crude prices and that of refined products, even when inter related both physically and in financial speculation, they respond to different demand and supply forces", points out the OPEC report.

Following on this line during the last two years crude prices have been under pressure from market factors such as a strong increase in demand and a minimum surplus production capacity, as well as other elements such as "the growing geopolitical conflicts".

But there have also been stabilizing factors such as a greater supply, an increase in OPEC production capacity and larger strategic and commercial reserves in consumer countries, "which now stand at their highest level in the last twenty years".

OPEC detects lesser volatility in crude prices compared to gasoline which are determined by a strong jump in demand given the ever more strict environmental conditions for the production of fuels, a relatively low inventory level, and a limited capacity in refineries.

However the positive side of the oil extraction sector "could not be sufficient to moderate the level of prices given the current bottlenecks in the refining sector and the increasing geopolitical tensions".

Finally OPEC lowered its estimate for world oil demand in 2006 due to slowing economic growth. Demand is now expected to grow by 1.3 million barrels per day (bpd) to average 84.5m bpd, a downward revision of 80,000 bpd from last month's figure.

This was due to "an unexpected decline in OECD consumption in the second quarter of this year". The OECD zone comprises 30 leading economies, including the US, Japan and Western Europe.

"The estimated demand for OOEC crude in 2006 is expected to average 29.1m bpd, representing an upward revision of 0.2m bpd versus the previous month," the report said. The overall trend, however, is that global economic growth is slowing.

OPEC added that "the world economy is forecast to grow by 4.2% next year, compared to 4.8% in 2006.