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Perilous
Times
Oil prices to double by 2022, IMF warned
Global trade would be profoundly affected if crude prices
permanently doubled from current historic high of $113 a barrel
Terry Macalister and Lionel Badal guardian.co.uk, Sunday 13 May 2012 19.37 BST
The oil prices warning comes as the International Energy Agency
predicts fuel consumption will accelerate for the rest of this
year. Photograph: George Esiri/EPA
The International Monetary Fund (IMF) has been warned by its
internal research team that there could be a permanent doubling of
oil prices in the coming decade with profound implications for
global trade.
"This is uncharted territory for the world economy, which has
never experienced such prices for more than a few months," the
report warns.
The new IMF "working paper" come as the value of crude on world
markets remains at the historically high level of $113 a barrel
and just after the International Energy Agency reported that
consumption would accelerate for the rest of this year in line
with a wider economic recovery.
Undertaken amid mounting concerns about "peak oil", the IMF study
does not presume that there is a constraint on how much oil can be
taken out of the ground. It prefers to believe that extraction
rates will depend on the price that will be able to be charged for
the final product.
"While our model is not as pessimistic as the pure geological view
that typically holds that binding resource constraints will lead
world oil production on to an inexorable downward trend in the
very near future, our prediction of small further increases in
world oil production comes at the expense of a near doubling,
permanently, of real oil prices over the coming decade," argues
the report, entitled The Future of Oil: Geology v Technology.
The paper, which contains a warning that it should not be reported
as representing the views of the IMF itself was nevertheless
prepared by several authors including Jaromir Benes, a former head
of macroeconomic modelling in the Czech National Bank but now
employed by the IMF in Washington.
It says that its oil market "models" have been significantly more
accurate than others in a world where predictability has been
historically low. But it adds: "Our empirical results also
indicate that if the model's predictions continue to be accurate
as they have been over the last decade… the future will not be
easy."
Meanwhile, the Paris-based International Energy Agency, which
advises industrialised nations, including the UK on energy policy,
said crude prices would remain high in 2012, due to tensions
between Iran and the west. "The path of market fundamentals for
the rest of the year remains highly uncertain and geopolitical
risks will likely continue to keep prices high," the agency said.
The agency believes that a period of declining demand – triggered
by the slowdown in the global economy – is now over and the upward
trajectory resumed.
The Opec oil cartel made similar statements a week ago, saying
that oil demand growth had "stopped its declining trend".