Energy agency warns of danger from high oil prices

By Agence France-Presse
Thursday, February 10, 2011 8:21 EDT
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PARIS – The global recovery will drive oil prices dangerously higher this year, possibly to the level where they could push the economy into a marked slowdown, the IEA warned Thursday.

The prospect of rising inflation, driven by oil and other higher commodity prices, coupled with political instability in the Middle East is an added concern, it said.

The IEA, the energy policy and monitoring arm of the Organisation for Economic Cooperation and Development, said the global oil bill was likely equal to 4.1 percent of total output in 2010 and would rise to 4.7 percent this year.

“Under current assumptions for global GDP, oil price and oil demand, the global oil burden could rise to 4.7 percent in 2011, getting close to levels that have coincided in the past with a marked economic slowdown,” the International Energy Agency said in its latest monthly Oil Market Report.

“Indeed, the combination of higher prices … emerging inflationary pressures and instability in the Middle East is not a healthy one,” it added.

The forecast was based on oil at $90 a barrel but Brent crude has rocketed over $100 recently as unrest in Egypt stokes concerns of possible disruption to supplies via the Suez Canal and wider fears over the Middle East.

The IEA had warned last month that sustained oil prices at $100 posed a real risk to the world economy and said Thursday that demand would still grow even if the pace of the global recovery eases overall.

After taking into account the latest economic forecasts from the International Monetary Fund, the IEA said global oil product demand should reach 89.3 million barrels per day (mbd), an increase of 1.5 mbd from 2010.

Separately, the OPEC oil cartel raised its 2011 global oil demand growth estimate to 1.62 percent from the previously estimated gain of 1.23 percent, to 87.74 mpd, citing bitter winter and continued economic expansion, especially in the United States and China.

OPEC, led by oil kingpin Saudi Arabia, supplies 40 percent of the world’s oil.

The IEA noted that Chinese demand has continued to rise strongly, jumping 17.7 percent year-on-year in December to 10.4 mbd, another record.

Efforts by the Chinese government to cool its runaway economy made forecasting difficult but the IEA said it expected Chinese oil demand to rise by 6.0 percent in 2011 to 9.96 mbd on average.

The IEA raised its demand growth forecast for OECD countries by 90,000 barrels per day (bpd) to give a total 46 mbd in 2011, representing an overall decline of 0.2 percent as the developed countries cut down fossil fuel use.

For the non-OECD countries, the forecast was increased by 60,000 bpd to give 43.2 mbd, representing an overall gain of 3.7 percent for the year.

Global oil supply rose 0.5 mbd in January to 88.5 mbd, the IEA said, with OPEC supply alone hitting a two-year high at 29.85 mbd.

Excluding Iraq, which is not subject to OPEC quotas, production rose to 27.2 mbd, against the agreed level of 24.845 mbd set in December 2008.

Increases by the UAE, Angola, Libya and Venezuela partially offset slightly lower output from Iran and Nigeria.

With debate rising over speculation driving rising commodity prices, including for oil, the IAE noted that the oil market “tightened significantly in 2010.”

It warned that US proposals to limit speculative positions “will severely constrain trading activity which would lead to increased, rather than reduced, volatility.”

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  • Don Corleone

    …and profits ever higher!

    I am in the wrong racket.

  • Taleisin

    Didn’t Obama give the car companies huge amounts of money to redevelop the electric car.
    Now might be a good time to put them on the market. Or doesn’t America have the expertise?

  • DesertWren
  • Taleisin

    Cool. How are they selling?

  • DesertWren

    Hard to tell. Only been on sale for a little over a month.

  • Taleisin

    How is the price compared to other American cars?

  • DesertWren

    About the same. $40,000 MSRP

  • Taleisin

    Excellent. I hope they sell well, and have brakes that work. ;)

  • http://pulse.yahoo.com/_A7KHDX6CSM5TLM6G77EHCIS5ZA Chuck W

    OPEC is again pointing the finger at “oil speculators” as the cause of the price spikes. Anything to get the attention off of the fact that they are already in decline. OPEC hit a two year high of 29.85 mbd but they will never be able to exceed the peak they reached in 2008. Iraq might help now that the US essentially controls it, but they would be lucky to get over 31 mbd.

  • Mr. Neutron

    December 2010: 326 Chevy Volts sold
    January 2011: 321 Chevy Volts sold

    December was the first month the Chevrolet Volt and Nissan LEAF electric cars started deliveries in the US, kicking off the electric car future for our nation.

    Both companies have begun the process deliberately very cautiously with the intention of slowly ramping up sales this year. Nissan and GM are carefully monitoring the early adopters’ experiences and will adapt to their feedback in these early stages.

    GM expects to sell 10,000 to 25,000 Volts in 2011 – they are going to have to “ramp up” very soon. To sell the minimum of 10,000 in 2011, they have to average 833 per month. To sell 25,000, they have to average 2083 per month:

    For comparison, the Toyota Prius sold 17,700 units in 1998, the first full year of sales (they sold 300 in December 1997).

  • http://pulse.yahoo.com/_QMPOO3PZFN7XV2XZKCGSXXR3WM Joe Somebody

    The Volt is junk for anyone who’s paying attention. They lied about the drive train (the gasoline motor ends up directly driving wheels but it was said to only be a generator motor), the cost is MUCH higher than the general market (you noted $40k, but you can buy a brand new car with 30 – 35mpg for $15k – $20k, I just got a 2010 Prius for $23k and 50mpg city), and the electric range is pretty abysmal, all things considered.

    Toyota, Nissan, and Tesla (Model S hitting the streets in a year or so, with 160 mile range base) are way ahead of the American brands.. and we still have no large scale plans for a sound charging infrastructure which will be needed if you expect people to be even a little willing to risk stepping away from liquid fuels.

    I’d like to see a VW electric with a high performance diesel/bio-diesel generator.. they could field that in 2 years, if the got moving on it.

  • http://pulse.yahoo.com/_QMPOO3PZFN7XV2XZKCGSXXR3WM Joe Somebody

    the 2010 Prius seems to have sold just over 100k units in the U.S. Chevy has a lot of ground to make up.. especially given that the base Prius is just about 1/2 of the cost of a Volt with better fuel economy (past the 10 miles or so you’ll get out of the all electric of Volt, presuming you can take best advantage of the plugin aspects and very short commute range).

  • Anonymous

    My neighbor just got a brand new Prius for $23K. I’d go with the Prius. It seemed pretty cool. Too high tech for me though. I prefer an old VW diesel on SVO personally. But the Prius is impressive. But I’ll still push the gasifiers as they can open the parameters for carbon neutral fuel. Boycott Fossil Oil for all the obvious reasons. Perhaps a spike in Oil prices will start to kill its demand for good. That should be the personal goal imo.

  • Anonymous

    Not sure about the Volt but the brakes of the Prius are generators to recharge the batteries so the pads last longer than regular cars as a lot of the heat and force from braking turns into electricity instead of brake dust. Electric cars will have less maintenance than solely Internal Combustion Engine vehicles… The Prius has an ICE but doesn’t get used as much as a typical ICE car and it’s smaller so there will be less oil to change, plus around town in warmer weather you can run on plain electric, there is a switch for that. Put in a solar car port at work and let the sun charge your car. Nice to have extended range. They should put a SVO friendly diesel in there, but the Oil companies wouldn’t like that so it’s up to the tinkerers to come up with the better solution. Let me know if someone is already doing it. It would surprise me if such a modification didn’t exist…

  • Anonymous

    Plus if you buy american aren’t the taxes contributing more to the war machine with its censored crimes? Japan isn’t doing anything as draconian these days are they? Definitely not on such a large scale anyway. You can get extra Plug In Batteries for the Prius to extend the range. Not sure if its cost effective yet. But if I had the money I might do it just to use less fossil. If I had one I’d look into it. I’ll probably look into it anyway. An electric car with extended range using SVO. How could it be so difficult to build? The technology has been around since WW1. Porsche was building all wheel drive monster transporters for the Kaiser to get the big cannons to the front. Electric motor at each wheel with an on board generator. Make the generator a SVO sipping diesel and there you go. They had it all back then. Then freudian marketing took hold…

  • Anonymous

    That was the rhetoric. America has the expertise to outsource the expertise. If I were to buy new I’d look at the Prius. I’d wait a few years to buy an altogether new model, let them work out the bugs. Plus I’d rather buy from a country that was less Nazi-like in its foreign military policies… unless it was used. I’m not a proud american, but that’s just me. Plus GM has a terrible history. I hate everything GM post 1993, since they stopped offering the old 350 V8. Too many computers, I went to a GM tech class once and they were telling the techs “not to talk badly about GM at the bar… because it will hurt business and hurt jobs…” Real competitive, huh? Then they went on to explain how they poured Great Stuff foam insulation into the driveshafts of the little S-10 pickups to stop the vibration problem created at the design board, but the techs at the dealer only had so much time to do it so the Great Stuff foam would harden on one side of the driveshaft creating even more vibration. This is a factory repair instruction! I know that I’m biased but newish GM is crap to me. The 60′s were a different story although the brakes back then didn’t exactly match the power of the engines. I believe I read that more kids were dying in their muscle cars back then than in Vietnam. Ralph Nader was doing his thing back then. However, the rules and regs killed the styling and added a lot of plastic fluff in the 70′s… Now everything is generic looking and computerized and the cops and gov’t want to be able to control you with their On Star crap. The Cash for Clunkers program killed a lot of the older cars that were easier to work on… The high scrap prices from outsourced companies recycling the metal didn’t help save the older cars either. Now everything is a lot pricier than it used to be… That could be good as driving is sort of bad. Traffic can be hell on the nerves… accidents, bicycles get hit – but the public transportation is expensive and not that great. I’m so happy we are promoting freedom in other countries and using Ultra Violence to do it. I hope other countries develop like us… I love the YouTubes of U.S. tanks driving over Iraqi civilian’s cars for little reason besides inflating the Yahoo soldier’s tiny egos. Proud to be an American! – obvious sarcasm – I’ll stop it here…

  • Taleisin

    Wow. Thanks for the response. Its a good read.

  • Taleisin


  • Anonymous

    Everything we buy it’s getting more expensive. Just go to a grocery. Many more countries especially third world countries will fall under poverty level in record time. Who ever believes the economy will rebound think again. We still have to fight through the second economic slump ahead. No doubt we’ll see more countries uprising and thousands more living in tent cities.

  • Anonymous

    cella a brittish energy company has developed a synthetic gas, that they speculate they can bring to market at 1.50 us dollars a gallon.

  • NadePaulKuciGravMcKi

    new record profits for Big Oil

  • Anonymous

    I’m just glad Ron Paul and his corporatist cohorts in the GOP don’t want to regulate Goldman Sachs’ foray into the commodities markets, their profit taking and market manipulations surely can’t have anything to do with increases in commodity prices and especially food prices across the board, no matter what some stupid writer at Harper’s Magazine has to say or that rabble rouser, Matt Taibbi thinks, as long as we “end the Fed” we’ll be “able to feed a family of four on $ .50 an hour.”

    It’s more likely climate change and drought somewhere that is driving up food prices not four more layers of profit taking by Goldman Sachs. So keep the government out of the regulation business. Let the “free market” determine everything, it is always right.

  • Anonymous

    Valero gas stations might have the moral high ground over others, for example BP…

    “Cellulosic ethanol eliminates the food vs. fuel debate by using non-food plants that can be grown in environments where the soil is infertile.”

  • Mr. Neutron

    The all electric range of the Volt is 25 to 50 miles. It depends, of course, on things like outside temperature, heating or air conditioning used, wind speeds, whether you are stuck in traffic, how aggressively you drive, how much uphill or downhill on your route, etc.
    People have gotten more than 50 miles on a single, overnight charge:
    The Prius has better fuel economy only compared to the Volt’s “charge sustaining mode” (when the ICE is on), not overall fuel economy (total miles driven per gallons of gasoline used). The Volt has much better overall fuel economy.

    The Volt will cost you $32,780

    The Prius starts at $23,050

    When gasoline hits $5/gallon in 2012, people will be glad to drive on electricity:

  • Anonymous

    One item I see rarely considered is where is all the extra electrical capacity to recharge several million new electric vehicles going to magically appear from? As it stands now US electrical generation capacity is running at near max most times and when you add summer heat or extreme winter cold the electrical grid buckles from the load. Rolling blackouts in Texas, etc.

    There is no free lunch, so the power required to charge your Prius / Leaf / Volt has to come from somewhere. More Gas fired power plants, nope, coal? Don’t think so, Nuc plants, problems there as well. Recently I read an intersting story on a fantastic battery in use NOW that in banks the size of a deep freeze will power a home, It’s called the Bloom Box here’s the link: http://www.cbsnews.com/stories/2010/02/18/60minutes/main6221135.shtml

  • Mr. Neutron

    several million new electric vehicles
    Well, Chevy and Nissan would love to sell several million Volts and Leafs, but it will take at least 10 years, most likely. GM plans to sell about 10,000 Volts this year (25,000 if they are lucky with production issues and demand).

    If people charge them overnight, as intended, there will be no problem with the power grid for a few decades – just as home computers and flat panel TV’s didn’t bring down the power grid – that’s part of the x% growth per year that the power grid always sees.

    The reason most utilities give a discount at night (or would, if people had power meters with time-of-use capabilities) is because large base-power plants (like coal or nuclear) cannot be started and stopped quickly (like the small natural gas peaking plants can). Utilities would love to have many million more paying customers for the power generated at night from these big unstoppable power plants. Plugging in a Volt overnight takes about 11 to 12 kWh to fill the battery its full 10.4 kWh (I read it took 12 kWh with the fast 240 volt charger, I think the slower 120 v charger is more efficient). The Volt battery is 16 kWh, but they only use 65% (they don’t charge all the way, or discharge all the way), which makes it last much longer.

    12 kWh costs about $1.20 in many places – to drive 40 miles the next day. Much better than $3 gasoline – you’d need to get 100 mpg to go 40 miles on $1.20 for $3 gasoline. For $4 gasoline, you’d need to get 133.33 mpg. For $5 gasoline, 166.66 mpg.

    The Bloom box sounds interesting – a more efficient way to get electricity from natural gas. That’s the nice thing about electricity – you can generate it all sorts of ways, from natural gas, coal, oil, wind, solar, tides, bicycles, Bloom boxes, hydrogen fuel cells, waterfalls, whatever. But gasoline comes from crude oil, of which the US imports about 12 million barrels/day.

  • Anonymous

    Electricity definitely has its advantages. In cars it means less maintenance, less brakes wearing, I bet the cars will go longer. One would think they could be built cheaply. More homes will become mini power stations with solar right now as well. The amount of gasoline that is consumed these days is ridiculous. The oil economy is going to be phased out at some point. It can’t happen fast enough, There are old technologies that already play a part in this ie veg oils and biomass. I like the simple idea of plucking fuel off a tree in the back yard or pressing oil. An old Lister engine makes a nice sound. Throw it in a soundproofed shed…
    and then there is the HHO on demand…
    and you could gasify an old V8 and belt it up to a 40 KW genset at 1800 rpms. That should turn back a residential power meter pretty quickly. Not as clean as solar but cleaner than with liquid fossil fuels, safer than nukes… 100 year old technology – simple, almost caveman like. Perhaps a nat gas generating plant would be cleaner and more efficient at the end point, but they frack to get the gas and then you have to deal with a huge monopolistic company that has its hands all over the fuel and politics. It’s not sustainable…