by Jerome a Paris
Tue Jun 10th, 2008 at 05:55:53 AM EST
IEA says high oil prices needed to cap demand
The IEA said in its monthly oil market report that “supply growth so far this year has been poor and higher prices are needed to choke off demand to balance the market”. It added: “Abnormally high prices are largely explained by fundamentals”. (...)
In its report, the IEA cut slightly, as expected, its oil demand growth forecast for the year, but surprised the market with a deep reduction in its non-Opec supply growth forecast, leaving the world economy more dependent than anticipated on Opec, the oil producers’ cartel. “This is a case of supply and demand pulling in opposite directions to push prices higher,” the IEA said. “Global market fundamentals showed continued tightness, with constrained supplies and robust non-OECD demand growth.”
'Serious' people have been telling us that current prices were not really justified, or caused by speculation, or unlikely to last as supply is boosted and demand reduced - ie they have been telling us that these prices are temporary and not something that we need to do anything much about.
Well, the IEA is telling us that this is not the case, and that we'd better pay notice. Both supply and demand are still going in the wrong direction, and prices will increase until that changes. Whether we like it or not, it WILL change: the only choice we have is whether this is done in a way we manage (as much as possible) or if it is forced upon us.
This is not a bubble, this is not a temporary phenomenon. Pundits, politiicians: please take notice and start replacing your denial with some much needed sense - and action.