Higher oil prices could climb even higher in coming months because of the limited capacity of many producers and the relatively low level of stocks, the International Monetary Fund warned Tuesday.
"Significantly" higher-than-expected oil prices due to production constraints and strong demand in the expanding global economy are a major threat to the continued strength of the global growth, the IMF said in its semi-annual World Economic Outlook report.
Spot oil prices were at about 33 dollars per barrel earlier in the month, before the September 10 decision by the Organization of Petroleum Exporting Countries to increase production by 800,000 barrels per day.
But oil prices rose further immediately after the OPEC decision. Low stocks ahead of the winter in the northern hemisphere, especially in the United States, the largest oil consumer, are putting upward price pressure on the market.
Thus the outlook for oil prices remains "highly uncertain," the Fund warned. "With many oil producers close to capacity and stocks relatively low, there may still be upside risks to prices in coming months."
Oil prices have more than tripled since March 1999, when OPEC cut output to revive prices flagging around the 10-dollar per barrel level.The Fund predicted that oil prices this year would be 47.5 percent higher than in the previous year, which saw a 37.5-percent increase, and would decline by 13.3 percent in 2001. That compared with its April forecast of a 12.4-percent rise in 2000 and a 5.9-percent rise in 2001.
The price movements are determined on a simple average of key spot prices. According to the formula, the average price of oil in 1999 was 17.98 dollars, and is forecast to be 26.53 dollars in 2000 and 23.00 in 2001. In a scenario of a sustained five-dollar per barrel increase, the oil imports by advanced countries would be raised by about 40 billion dollars annually compared to the level of the latest WEO, the Fund said.
GDP growth in industrial countries would be cut by 0.2 percentage points in 2001, accompanied by higher inflation and interest rates. The implications of continued high oil prices on the amount of monetary tightening needed to control inflationary pressures in the United States and some other countries "remains unclear," it said.
While oil exporters, mainly in the Middle East, would reap increased trade balances, a sustained
five-dollar per barrel price rise would have a negative impact on many developing countries, especially in Asia because of its relative oil dependence.
The overall impact on other developing country regions -- a mix of oil exporters and importers -- would be small, but many individual developing nations would be seriously affected.
Trade balances for some developing countries would erode by more than 0.5 percentage point of GDP, with a greater than one-percent reduction seen for countries such as Burundi, Ghana, Jordan, Lithuania, Mongolia and Ukraine.—AFP.
©--Agence France Presse.
