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IEA statement on high oil prices
Source: International Energy Agency
While $100/bbl oil may have grabbed the market’s attention, the reality is that oil prices have been extremely high for many months now. We have emphasised our concern about the continued tightness in the oil market in recent issues of the Oil Market Report. Prices have been rising and stocks falling over most of the second half of 2007, recently falling
below the fiveyear average. This week, shortterm factors such as cold weather, falling inventory levels in the US and elsewhere, together with rising geopolitical tensions and the usual 1 January flow of investment fund money – especially into commodities this year against the backdrop of a weakening dollar have edged us back to that milestone.
$100/bbl may be just a symbolic figure but it is a strong reminder that consumers and governments have to implement measures that improve energy efficiency. Such measures are available now and provide the most effective shortterm response. In the longer term, greater investment in the upstream and downstream sectors is needed. The resources are there, but access to resources, aging infrastructure and chronic new project delays and cost inflation mean it will take time to bring the oil to consumers. More broadly, consumer countries must also increase investment in alternative energy sources.
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