London: The rapidly growing appetite for fossil fuels in China and India is likely to help keep oil prices high for the foreseeable future—threatening a global economic slowdown, a top energy expert said.
The unusually stark warning by Fatih Birol, chief economist of the International Energy Agency (IEA), comes as the agency prepares to issue its influential annual report next week, which will focus on China and India.
Warning note: Fatih Birol.
In preparing the report, Birol said he had experienced “an earthquake” in his thinking. “China plus India are going to dominate growth in the oil markets,” Birol said at an oil industry conference.
During the past 18 months, he said, more than two-thirds of the growth in global oil demand came from China and India alone.
Demand for oil in China, Birol added, would eventually equal the entire supply from Saudi Arabia.
Partly as a result, he said, the annual report would predict that oil prices, now at about $93 (Rs3,655) a barrel, could remain at levels much higher than thought possible in the past.
This, he said, heightened the risk of a serious global economic slowdown.
“We may see very high prices that will come to a level where the wheels may fall off,” Birol said. “I definitely believe that if prices stay at these levels, there will be a slowdown of the global economy.”
Birol said China and India could help reduce demand and the environmental impact of their booming energy consumption by introducing greater efficiencies, building up renewable sources of energy, using more nuclear power—and by committing to cutting emissions.
“We think that climate change should be one of the topics that they reconsider as both China and India are becoming major players in the global international scene,” Birol said.
“In accordance with that, they should also receive some responsibility,” he added.
China and India have long resisted calls to cut emissions, saying they need to grow to match developed world standards of living. They argue that other major emitters of greenhouse gases, such as the US, should lead the way in cutting emissions before poorer and less developed nations bear the same costs.
The debate, which has undermined the Kyoto Protocol, a global treaty on greenhouse gas reductions, is set to resume when nations meet in December in Bali, Indonesia, where the two-year process of negotiating a successor treaty to Kyoto, formally gets under way.
At the oil conference, organized in part by International Herald Tribune, major industry players struck a firmly upbeat tone about oil production—particularly if pricesstay high.
“At $93 a barrel, everything is possible,” said Jose Sergio Gabrielli de Azevedo, chief executive of the Brazilian oil company, Petrobras.
He suggested that oil producers would continue to have incentives even to pursue the most expensive of technologies, such as producing oil from shale.
But other officials at the event, including Guy Caruso, an administrator at the US department of energy, emphasized the need for continuing investment to recover oil from well-established oil-producing sources and countries, where he said the most important supplies would continue to come from in the future.
©2007/The International Herald Tribune