IEA warns on impact of record oil price
By Javier Blas in Carola Hoyos in Baton Rouge and George Parker in Manchester>Published: September 9 2005 23:58 Last updated: September 9 2005 23:58>>
Record oil prices are starting to hurt economic growth and curtail energy consumption, the International Energy Agency warned on Friday. The energy watchdog said oil consumption was now forecast to increase this year at less than half the pace of 2004. The IEA's warning came as oil companies faced mounting pressure in Europe to ease the economic pain of soaring fuel prices. France threatened a windfall tax on “exceptional” profits unless the sector cut petrol prices and increased investment in renewable energy.
The IEA cut its oil demand forecast for 2005 by 250,000 barrels a day, to 1.35m b/d, far more than had been expected. Much of the drop in demand happened before Hurricane Katrina drove oil prices beyond $70 a barrel.
The agency said demand had been far “weaker than expected” throughout the summer and was likely to suffer further in the wake of the storm. The IEA has cut its demand forecast by 450,000 since July.
Prices for actual barrels of oil have fallen dramatically over the past week in spite of the rise in futures prices. US oil on Friday fell 49 cents to $64 a barrel.
Several tankers due to travel from Latin America to the US have been cancelled. Saudi Arabia and Kuwait have also cut their prices. Mexico has cut its exports by a fifth while Venezuela has diverted some oil to storage tanks in the Caribbean. In spite of the surplus of crude, the US and Europe have released more than a million barrels a day from emergency reserves, reinforcing suspicions that they are using the crisis triggered by the hurricane to damp oil prices. The most robust political threat to the oil industry came from Thierry Breton, French finance minister, whose promise to bring the French deficit below the EU limit of 3 per cent of GDP in 2005 could also be boosted by a windfall tax on oil profits.
“We do not exclude the possibility of putting to a vote in parliament an exceptional tax corresponding to an exceptional situation,” Mr Breton said in a television interview on Thursday night.
“I hope it doesn't come to that,” he added. “But in any case we are determined.”
Europe's finance ministers, meeting in Manchester, are expected to step up the attack today, urging the industry to increase refining capacity, and calling for transparency in the market to tackle speculation.
Jean-Claude Trichet, European Central Bank president, said record oil prices were “clearly a risk” to the economy.
The IEA said that the slowdown in demand was shared worldwide, but raised concern about fiscal implications of subsidising product prices when international prices are high in Asia's emerging countries.
Record oil prices are starting to hurt economic growth and curtail energy consumption, the International Energy Agency warned on Friday. The energy watchdog said oil consumption was now forecast to increase this year at less than half the pace of 2004. The IEA's warning came as oil companies faced mounting pressure in Europe to ease the economic pain of soaring fuel prices. France threatened a windfall tax on “exceptional” profits unless the sector cut petrol prices and increased investment in renewable energy.
The IEA cut its oil demand forecast for 2005 by 250,000 barrels a day, to 1.35m b/d, far more than had been expected. Much of the drop in demand happened before Hurricane Katrina drove oil prices beyond $70 a barrel.
The agency said demand had been far “weaker than expected” throughout the summer and was likely to suffer further in the wake of the storm. The IEA has cut its demand forecast by 450,000 since July.
Prices for actual barrels of oil have fallen dramatically over the past week in spite of the rise in futures prices. US oil on Friday fell 49 cents to $64 a barrel.
Several tankers due to travel from Latin America to the US have been cancelled. Saudi Arabia and Kuwait have also cut their prices. Mexico has cut its exports by a fifth while Venezuela has diverted some oil to storage tanks in the Caribbean. In spite of the surplus of crude, the US and Europe have released more than a million barrels a day from emergency reserves, reinforcing suspicions that they are using the crisis triggered by the hurricane to damp oil prices. The most robust political threat to the oil industry came from Thierry Breton, French finance minister, whose promise to bring the French deficit below the EU limit of 3 per cent of GDP in 2005 could also be boosted by a windfall tax on oil profits.
“We do not exclude the possibility of putting to a vote in parliament an exceptional tax corresponding to an exceptional situation,” Mr Breton said in a television interview on Thursday night.
“I hope it doesn't come to that,” he added. “But in any case we are determined.”
Europe's finance ministers, meeting in Manchester, are expected to step up the attack today, urging the industry to increase refining capacity, and calling for transparency in the market to tackle speculation.
Jean-Claude Trichet, European Central Bank president, said record oil prices were “clearly a risk” to the economy.
The IEA said that the slowdown in demand was shared worldwide, but raised concern about fiscal implications of subsidising product prices when international prices are high in Asia's emerging countries.
posted by Marcel at 10:38 AM
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