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| Sunday, 7 August 2005 |
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World oil prices will remain high - Dr Kelegama by Elmo Leonard World oil prices hit a historic peak above $62 per barrel in New York trade, on supply concerns a week past, but fell slightly August 2, following the death of King Fahd of Saudi Arabia, whose country is the world's biggest exporter of crude. Unconcerned, the world's leading central banks warned that oil prices are not expected to fall in the near future due to demand in many ways drowning the factor of supply. Another component for the buoyancy of oil prices is the uncertainty over the policy of the new president of Iran. The affects of global oil hikes on Sri Lanka's economy will be severe unless there is less dependency on crude, while energy saving processes are adopted. Sri Lanka is currently 65 percent dependent on oil for electricity, against 80 to 95 percent dependent on hydro power in the 1980's, executive director of the Institute of Policy Studies of Sri Lanka (IPS) Dr Saman Kelegama said. Also, with the northern winter due to begin end-October, there are indications of world oil hikes in the coming months. Making it evident is the price of London Brent North Sea crude hitting a record high of $60.90 per barrel Monday last week. Mirrored on what could come, railway travel increased by 50 percent effective last week. With escalating oil prices, bus fares too will have to go up. It would also mean that electricity tariffs will go up, and with it, cost of production of industries and exports. The increasing prices of crude will also reflect on the prices of all consumer products including vegetables and fruits, Dr Kelegama said. Global demand for oil stands at 84.3 million barrels per day in 2005, up from 76.7 million barrels per day in 2000. Demand for oil from the rapid growth in Asian countries, particularly India and China and the rise in their middle class is rapidly adding to demand. During the past five years 35-40 percent of additional oil demand has come from China and India. India is the sixth largest energy consumer in the world and by 2010 will be positioned fourth. By 2025 Asia will account for one-third of world oil demand, Dr Kelegama said, quoting OPEC estimates. There are indications of slow growing OPEC supply capacity and shrinking of the world refining capacity. OPEC stock changes will be slow and until 2015 will provide 37 percent of world supply. Non-OPEC supply is forecast by many oil economists to continue growing by one million barrels per day for the next few years, while total world demand will not be covered. The US had not built a new oil refinery for 29 years and is running its old oil refineries at 90 percent capacity, Dr Kelegama said, quoting international oil sources. Investments must be made now to bring in new energy sources into productivity within the next decade and about $16 trillion is required to meet energy needs by 2030 Dr Kelegama said. In the new situation, US, Europe, and Asia, particularly Singapore, China, India and Japan are reconsidering their energy policies. Many countries are exploring alternative sources of energy and methods to curb demand to make themselves less vulnerable to price hikes or sudden shortages of oil. Nuclear and wind power are on the local agenda. Sri Lanka cannot be isolated and only three new large projects remain, being Norochcholai, and two hydro projects, Upper Kotmale and another. A few weeks ago a Chinese company was reported to have contracted for
Norochcholai and the work is expected to begin next month. |
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