High Oil Prices Here To Stay, Says IEA Economist

BERLIN (Reuters) - High oil prices are a threat to the global economic recovery and present a challenge the world will have to face over the long term, the International Energy Agency's chief economist said on Wednesday.

"The age of cheap oil is over, though policy action could bring lower international prices than would otherwise be the case," Fatih Birol said at a conference in Berlin.

Flagging specific concerns for Europe, Birol said that if prices held at current levels, Europe's oil costs would be higher than in 2008, a record year for prices.

"Europe is the weakest link in the chain of economic recovery ... ," he said.

"In Europe, 75 percent of the gas prices are linked to oil prices. In a few months gas prices are going to increase."

Oil prices have surged in recent weeks on unrest in the Middle East and North Africa, producing regions that Birol said are among the few places that could increase production in coming years.

"In the current context, I see risks that those investments may be deferred for some years as a result of cost increases and ... increasing risks for domestic and international investors," he told Reuters.

(Reporting by Rene Wagner, writing by Brian Rohan, John Stonestreet)

Copyright 2010 Thomson Reuters. Click for Restrictions.

Comments

[Keith Alban]

01:46 PM on 03/08/2011

I pay, will pay even more in the future & have paid well over a "dollar fifty" PER LITER for well over 8 years. Life finds a way. I drive daily over fifty miles ONE WAY 6 days a week. I also earn around 1600 bucks a month So you do the math, life moves on DEAL WITH IT. The rest of the world does.

[SofaKing22]

03:12 PM on 03/03/2011

I can imagine the oil tankers circling around the oceans. Must be one heck of a party out on the oceans. It must be like Lake Havasu during spring break. Ships tying off to each other and just partying until they are told to go somewhere when prices are favorable. Wait a minute I seem to recall a drunken ship captain crashing and causing a huge spill.

[popart]

03:01 PM on 03/03/2011

i see almost no real concern by the general public of any nation that shows that they even begin to understand that as demand continues to increase and production continues to decline...that oil will soon be as costly as gold. it is well past the time when we all need to envison a world with out cheap oil...because that day will soon be upon us and we are not going to be ready for it....and it is going to be a terrible awakening.

[muck-raker]

08:54 AM on 03/03/2011

the U.S. is now exporting ethanol to Brazil only to crash over 30 cents before recovering about 14-15 cents of those losses. Continued easing of ethanol production, profit taking on inter-market spreads and the rumors prompted the break. We heard rumors that the USDA may increase last year's production on next Thursday's Supply-Demand report due to higher test weights. If true that would mean the USDA would have to raise the yield to create the additional bushels. In our view this would set a precedent and frankly given the fact that last year the USDA never reduced production by acknowledging the light test weight we find this rumor to be a stretch. Weekly export sales are scheduled for Thursday morning and the trade is expecting to see positive numbers. The shipment data will also be closely looked at as the pace of shipments has been lagging and we know the export program has been back-end loaded. Weekly ethanol statistics continue to show easing production but it also shows great blending rates. The recent rise in the RBOB (reformulated gas) market has made ethanol blending quite profitable. Needless to say the trade will be quite interesting over the next few days as technical considerations battle fundamental considerations.

[pat8942]

08:26 AM on 03/03/2011

Monetary policy (Zero Interest) for the big players has a lot to do with it.
We all know that there is something that can be done to curb the paper oil trades, yet those who can do something refuse to, and even have the nerve to say this "rising oil prices do not yet pose a significant risk to the U.S. economy".
Unless he means the Wall Street Economy.

[planetjeffy]

09:57 PM on 03/02/2011

I blame Obama for high gas prices
because I have no idea what I am talking about

[AlanBannacheck]

09:20 PM on 03/02/2011

Peak oil anyone? If cheap energy goes, so will our economy. The time of being a disposable society is ending. We don't each have to have our own vehicle and burn several gallons of oil per day to be happy, do we? Come on people! We are so enveloped in this sphere of circular reasoning that we may miss this opportunity of a better existence, I.e. A simpler one.

[democrats for life]

09:11 PM on 03/02/2011

lets just bottle all the republican gas, that will drive prices down quite a bit

[rogergoldkin]

01:31 PM on 03/03/2011

What a really good idea!

[muck-raker]

08:21 PM on 03/02/2011

OUR Legislators are responsible for high price of gas. First Corn Lobby sends its people to bribe our legislators, MONEY TALKS. Today corn ethanol is adding to cost of gasoline and because of competition with our food it is raising our weekly food bill exponentially. taxpayers now pay a subsidy to farmer to grow CORN. Farmers with 400 acres are now millionaires. The cost to make they say is around .51 gal which must be added to our unleaded fuel by refiner. And in addition ethanol is responsible for 4% less power and mileage which means you are going to be filling up more often. Last week they have just passed and now have the authority for 15% total ethanol in our gasoline which will cause a loss of 6% total mileage and power and you can not use it in 2007 cars or newer. And last much of our high priced OIL is from speculation from Goldman hedge funds which with their very fast machines and the practice of buying pkgs and when date is due to sell they roll it over into another pkg actually creating a much higher demand causing prices to spiral up out of control. When they reach price which they consider good they sell leaving the public stuck with the high priced commodity. I have the link which explains the above practice to include naked shorting if anyone would like it. And last The media is also responsible for spreading FEAR and high prices.

[muck-raker]

08:07 PM on 03/02/2011

Congress, anxious to do something � anything � about the price of gasoline,has given agribusiness industry a mandate it can not refuse. Corn ethanol production must rise from 4.0 billion gallons in 2006 to 7.5 billion gallons by 2012. Anxious to make sure its corn ethanol mandate gets done, Congress has also decided to take our tax money and use it to subsidize production of ethanol. The current ethanol subsidy is flat 51 cents per gallon of ethanol paid to the agent (usually an oil company) that blends ethanol with gasoline.

But there is more. It costs money to store, transport and blend ethanol with gasoline. it must be transported by tanker to the distribution point where it is blended with gasoline for delivery to your gas station. It costs more to make a gasoline that can be blended with ethanol. Ethanol is lost through vaporization and contamination during this process. Gasoline/ethanol fuel blends that have been contaminated with water degrade efficiency of combustion. E-85 ethanol is corrosive to the seals and fuel systems of most of our existing engines (including boats, generators, lawn mowers, hand power tools, etc.), and can not be dispensed through existing gas station pumps. And finally, ethanol has about 30 percent less energy per gallon than gasoline. That means the fuel economy of a vehicle running on E-85 will be about 25% less than a comparable vehicle running on gasoline.

http://www.financialsensearchive.com/editorials/cooke/2007/0202.html

[oldgeek1]

06:43 PM on 03/02/2011

Look for oil prices to go lower. This is market speculation and those talking up high prices are selling short.

[Konnie]

06:10 PM on 03/02/2011

why else do you think these "people-led" overthrows were allowed to happen. all the terrible "uncertaintly" upsets oil stocks doncha know. wall street is all wanged out, haven't you
been paying attention..............i feel sorry for the citizens of those countries thinking things were
going to change................

[9191LEMKAUA]

05:11 PM on 03/02/2011

We have oil here in America!! AHHHHHHHH!!

[rpr]

06:52 PM on 03/02/2011

How much? How quickly can in be produced?
Peak Oil in the US happened in the 70s and oil production has declined ever since. There's a reason for that.

[mrh85]

05:10 PM on 03/02/2011

driving?

[OhManOhMan]

07:04 PM on 03/02/2011

or ride a horse

or drive electrical cars / golf carts

or walk

or ride a bike

or carpool/bus

[kenhamlett]

03:24 PM on 03/02/2011

Interesting isn't it that after a week of stories saying that the price of oil is spiking only because of unrest in the middle east, we now are getting more and more stories saying that once the price goes up, it is going to stay there and perhaps go even higher. So, the rise is driven by something more sinister than unrest in the middle east. It is driven by badly disguised greed among our friendly oil companies and oil producers.

[sandiegoconservative]

06:26 PM on 03/02/2011

Yes, it is always the fault of companies. Companies that can't produce or refine oil and are forced to ship it to us. Not to mention the government taxes on the sale of gas.

For every penny the company earns in profit, the government makes what, 3-4 times the amount?

[rpr]

06:53 PM on 03/02/2011

It's called supply and demand. The loss of Libya's output just pulled the next oil spike is by a year or so. Demand would have reached supply in 2012 according to the models and most experts.