MercoPress. South Atlantic News Agency

Oil price surge is driven by demand growth, argues IMF

The surge in oil prices this week to over 100 US dollars a barrel is part of a trend of higher oil prices driven largely by sustained growth in demand that is likely to have little effect on global growth, according to an International Monetary Fund spokesperson.

"The effects of these higher oil prices on global growth have been manageable, reflecting the fact that these higher prices are themselves largely driven by sustained demand growth including from emerging countries which are big, growing markets" said Masood Ahmed. Oil tumbled nearly 2 US dollars on Thursday over growing concerns with the US economy and greater inventories. OPEC has anticipated it might cut output when it meets early March as has been usual when spring arrives in the northern hemisphere. However Ahmed said concerns about future oil prices rises depended on the reason for the increase, particularly if they are related to supply constraints. "If the oil prices remain high because of more robust than expected growth in emerging markets then the increase would not be a bad sign in terms of the effect on the health in the global economy" he said. "On the other hand, a supply driven oil price spike would be a serious concern as it would reduce disposable income in oil importing countries and amplify the adverse growth effects from tightening credit conditions in the global economy" Ahmed added. While refinery closures and other supply-side events may be contributing to the recent spike in crude oil to all-time highs above the 100 US dollar benchmark, the overall trend in rising prices is being supported by growth in developing countries indicated Ahmed adding that with growth rates worldwide expected to ease, including in emerging markets, "that should help bring down oil prices".