High oil prices have yet to dampen demand, which will continue to rise and could soon exceed supply, the International Energy Agency warned on Wednesday.
It warned that the global economic recovery could be derailed unless governments take action to cut consumption and fuel prices, which pose a threat to stability in some countries.
“Without strong policy interventions in energy consumption, the risk that the global economy will veer off course for recovery remains high,” the Paris-based agency, which advises developed nations on energy policy issues, said in its latest monthly report on oil markets.
Oil prices have risen to over $120 at times from around $80 a barrel earlier this year as the Russian invasion of Ukraine has sparked supply concerns and the reopening of China’s economy following Covid lockdowns has boosted demand.
According to the IEA, if high gasoline prices have started to dampen demand in the developed world, this has been offset by stronger-than-expected demand recovery from China and some emerging and developing countries.
The IEA now expects oil demand to increase to 99.2 million barrels per day (mbd) this year and 101.3 mbd next year.
In the meantime, the supply this year has increased to 100.1 mbd. But even if it hits an expected record of 101.1 mbd next year, it will fall below demand.
The IEA noted the world has little spare capacity to ramp up production as the combined buffer of Saudi Arabia and the United Arab Emirates falls to just 2.2 mbd in August.
OPEC+ nations’ output could even fall next year if Russia’s supply is hit as expected by tightening international sanctions.
Coupled with tight refining margins causing imbalances in certain product markets and pushing up prices, “it may be demand-side action to reduce consumption and fuel costs that pose a threat to stability, particularly in emerging markets,” it said the IEA said.
He added that the dollar’s strengthening against other currencies as the US Federal Reserve raises interest rates is alleviating the pain of already rising food and oil import costs for numerous developing and emerging countries, including Sri Lanka, which has been beset by social unrest. has strengthened.
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