EU oil import costs have soared to > $400bn this year as crude prices continue to trade above $100 a barrel, heightening concerns about their impact on the region’s economy, the International Energy Agency has warned.
Strong demand, in particular from emerging market economies, coupled with tight supply on the back of disruptions in the Middle East and North Africa have helped underpin prices.
puts “an additional burden on recovery efforts,” said Fatih Birol, chief economist at the leading energy watchdog.
“If they stay at these levels in the coming months, they could well strangle the economic recovery,” he added.
According to BP’s Statistical Review, this year will be the first year ever with an average annual oil price above $100 a barrel. In real terms, the average annual price is the highest since 1864.
Strong demand, in particular from emerging market economies, coupled with tight supply on the back of disruptions in the Middle East and North Africa have helped underpin prices, according to economists. At the same time, “significant disappointments in non-Opec production in countries including Brazil,” have exacerbated the supply situation, said Jeffrey Currie, global head of commodities research at Goldman Sachs.
Also, “commodity markets no longer depend on economic growth in the US and Europe, but rather on economic growth in emerging markets, such as China,” added Mr Currie.
In the medium-term, the EU is seen as especially at risk from the high oil price, Mr Birol said.
The soaring import bill for the EU – it has jumped from $280bn in 2010 to $402bn this year – comes at a time of change for the bloc’s energy security.
As US crude imports begin to decline thanks to growing domestic supplies, in particular of oil trapped in rock, crude becomes a major issue for others. The IEA forecasts that the EU will overtake the US to become the biggest importer of oil in 2015. By 2020, China is forecast to overtake Europe.
“While the US will still maintain a significant interest in the stability of global oil markets, it will put the EU and China at the forefront of oil security,” said Mr Birol.
The IEA’s warning comes less than three weeks before Opec meets in Vienna in December. The Organisation of Petroleum Exporting Countries has already signalled it sees no need to increase its output. Opec members in the summer failed to agree an increase in oil production. The IEA subsequently released some of its emergency stockpiles to help compensate for the loss of Libyan oil and to help support economic recovery efforts.
The IEA said in its monthly report on the oil market in early November that supply and demand fundamentals were underpinning “stubbornly high prices”.
In the same month, in its World Energy Outlook, the agency said that to the year 2035, more than 90 per cent of future growth in oil production needed to come from countries in the Middle East and North Africa.
“If, between 2011 and 2015, investment in the MENA region runs one-third lower than the $100bn per year required, consumers could face a near-term rise in the oil price to $150/barrel,” it said at the time.
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