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Energy experts puzzled over oil prices

(Agencies)
Updated: 2008-07-02 20:57

MADRID, Spain -- As crude soared to a new record, the head of the International Energy Agency declared that the world was in the grip of an "oil shock," and the president of OPEC acknowledged he could not say whether prices would flatten out or continue to soar.

The comments by IEA chief Nobuko Tanaka, OPEC chief and Algerian Energy minister Chakib Khelil and other industry leaders at the 19th World Petroleum conference reflected the concern surrounding record oil prices that seem ready to spike higher.

An IEA report released at the conference confirmed what most consumers fear: that supplies of oil will remain tight, whether for cooking fires in the poorest countries or powering cars and cooling or heating homes in the richest. And that's despite record prices and reduced demand as costly crude dampens the world's oil hunger.

Reflecting the world's oil price doldrums, light, sweet crude for August delivery rose 97 cents to settle at a new high of $140.97 a barrel on the New York Mercantile Exchange. Prices at one point rose as high as $143.33, just 34 cents shy of Monday's trading record.

"We are clearly in the third oil price shock," declared Tanaka, comparing the effects to periods of soaring prices in the 1970s and 1980s.

But he suggested there is less of a likelihood of a quick fix this time.

"Those price peaks forced consumers into saving oil" and oil companies to look for new wells, said Tanaka, but now "the biggest energy savings have been made (and) ... the easy oil outside (of) a few countries has been found."

His agency's report said the world's estimated daily oil needs would rise from 86.87 million barrels this year to 94.14 million barrels in 2013 -- less than anticipated in its 2007 report because of skyrocketing prices.

The energy agency predicted producers would be able to meet world needs -- but noted that supply will exceed projected demand only by a daily 2 million barrels, a relatively thin cushion.

Tanaka said that tight supplies despite a price surge that would normally lead to increased availability came as a "shock."

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