The oil industry, faced with record high crude prices, is facing a structural crisis of the severity not seen since the 1970s when crude prices soared to unprecedented summits, an energy consultancy warned Monday.
Capacity expansion by the Organization of Petroleum Exporting Countries (OPEC) and a fall in world oil demand is needed to help to bring prices down, the Centre for Global Energy Studies (CGES) said in its latest monthly report.
“Restricting capacity expansion within OPEC, as has been the case for the last 30 years, will keep prices high until demand growth falters or the 21st century equivalent of non-OPEC oil is developed,” the London-based organisation said.
“The oil industry is facing a structural crisis of a severity not witnessed since the 1970s, with capacity shortages throughout the supply chain,” it added.
Oil prices raced up to new record highs on Monday, approaching 56 dollars in New York amid fears a strike could cripple supplies from Norway, the world’s third-largest oil exporter.
New York’s main contract, light sweet crude for delivery in December, hit a new all-time high of 55.67 dollars a barrel in electronic trading. It later stood at 54.72 dollars, a fall of 45 cents, as profit taking set in.
World oil prices have surged by about two thirds since the start of this year on supply worries. Adjusted for inflation, however, they remained far below the levels reached in the wake of the 1979 Iranian revolution when prices surged to upwards of 80 dollars a barrel in today’s money.
“The current rate of oil demand growth can no more be sustained at today’s prices than it could in the 1970s,” the CGES said.
“The global economy may be less oil-intensive than it was then, but economic growth is not immune to high oil prices, as some financial institutions are coming to realise.”
10/25/2004 16:06 GMT – AFP
