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Oil sector ponders new energy era

The price of oil broke above the 50-dollar-a-barrel mark in New York on Tuesday for the first time, raising concerns among officials, consumers and traders alike.

“Its not good news,” EU economic and monetary affairs commissioner Almunia said in Brussels,

“If this will be maintained in the coming months, of course, the European economy will suffer a little bit, both in terms of lower growth and higher inflation,” he said on the margins of a European Commission conference on the euro.

The president of the Arab Centre of Oil Studies, Nicolas Sarkis, agreed, saying: “This new increase in the price of oil can only have a negative impact on the global economy.” HSBC-CCF economist Antoine Brunet said that although high oil prices make push some costs higher — especially for transportation, it weighed on other prices, such as for cars and clothes. However, he said: “Ultimately prices increase but salaries slow and this negative situation tends to weaken the economy of industrialised countries.” Sarkis said that although prices were at record highs in nominal terms, they have been higher in the past when inflation is taken into account. “We are a long way from the record reached in 1981 after the second oil shock, which brought oil prices to 42 dollars per barrel at the time, the equivalent of 75 dollars today,” Sarkis said. Nevertheless, most experts agree that the world has entered a new era of higher oil prices in recent years. “Since 1995 and the beginning of China and India’s emergence, oil, like other raw materials, have been on the rise,” Brunet said, noting that “the price of steel and ferrous metals have also increased sharply in the last weeks”. And with their economies booming, so has global oil demand. “In 2004, oil demand rose 3.2 per cent, two times faster than expected,” Sarkis said. He said, “supply is stretched and disrupted by geopolitical events, speculation and uncertainty about global oil reserves, which we don’t know if they will be used up in 10 or 40 years.”