Oil prices in recent years have been marked by rapid and very wide fluctuations, causing problems for both producer and consumer nations, the International Energy Agency said on Thursday.
Over the past three months, the price for the European benchmark, Brent North Sea crude, has varied between a high point of $125 per barrel in March and a low of $89 in late June, the IEA said in its latest monthly report. Such price volatility can hit “fiscal revenues, investment and confidence in the economy” for exporters, while it “can have negative impacts on inflation and growth prospects” for importers. The G20 of developed and major developing countries has called for efforts to combat such price swings but the IEA said price “volatility itself is not the main problem … the main challenge is (current) elevated price levels combined with higher volatility.”
The IEA said this had become more prevalent since the 2008 global financial crisis, with Brent oil that year hitting a July high of $144 even as it averaged just under $97 for the 12 months period. In 2011 and in 2012 so far, it has run at much higher levels of more than $111 and $113, respectively, it noted. “Given the fragile state of the global economic recovery, the impact of high oil prices on global growth, especially in oil importing countries, is potentially more severe now than in 2008,” the IEA said.
“High oil prices already threaten to aggravate global economic slowdown by widening global imbalances, reducing household and business income, and boosting inflation.”
The IEA said that while prices and volatility cannot be separated from each other, persistently higher oil costs were the real concern, especially for importers for which they dampen the economy. Accordingly, “policies to deal with high oil prices should arguably be given priority over policies dealing with volatility,” it said.
The IEA said in the report that while it expected oil prices to hold at about current levels for the rest of 2012, they could fall by about 7.0 percent next year, based on current market indications and anticipated sluggish demand.