LONDON (Reuters) - The jump in oil prices in the past year is adding to concern about the economy, according to a draft of the International Energy Agency’s 2011 World Energy Outlook, which also raised its view of long-run prices.
The draft dated July 2011, obtained by Reuters ahead of the publication’s launch next week, assumes nominal oil prices of $114 a barrel in 2015 and $212 in 2035. Last year’s report assumed prices of $104 and $204 by those dates.
Brent oil prices hit a 2011 high of $127 a barrel in April as the conflict in Libya shut down its supplies. The IEA, which represents 28 industrialized countries, has repeatedly said this year oil prices pose a threat to growth.
“The dramatic rise in oil prices since September 2010 has added to doubts about near-term economic prospects,” the draft report said. Brent was trading at $82 a barrel at the end of September 2010.
The IEA is scheduled to release this year’s report, its flagship publication, in London Wednesday.
Prices are expected to go up over the long run as rising demand requires the development of more costly sources of supply. The price assumed by the IEA refers to the average crude import cost to IEA members — a proxy for international prices.
The draft report also said unrest in the Middle East and North Africa, or the Arab Spring, added additional risk to the global economy as it has pushed oil prices higher.
“The risk remains that if the unrest worsens or spreads to major exporting countries in the region, it could lead to a surge in energy prices that could tip the global economy back into recession,” the report said.
Last month, the IEA said the Arab Spring had disrupted investment plans in oil and gas projects as some governments had shifted their focus to meet increasing demands from their population.
This could, it said, push oil prices higher in the next five years.
IEA members are required to hold emergency oil inventories for use during supply disruptions. In June, it decided to release 60 million barrels in response to the loss of Libya’s exports, only the third such move in the IEA’s 37-year history.
The oil price assumptions are those of the IEA’s New Policies Scenario, the central case of this year’s WEO, and which includes the impact of measures announced, if not implemented, by countries around the world to tackle energy challenges such as climate change.
Oil prices are expected to be even higher in a second scenario, Current Policies, which includes only measures put in place by mid-2011 and in which demand would grow more quickly.
In this case, the nominal oil price is assumed to reach $119 in 2015 and $247 in 2035, up from $108 and $244 respectively in last year’s report.
Prices rise less rapidly under a third scenario, 450, which sets out a path toward limiting global warming and in which demand is lower. Oil reaches a nominal $171 a barrel by 2035.
While the draft IEA report indicated concern about the near-term health of the economy, it is more upbeat about longer-term prospects.
The report assumes world GDP will rise by an average of 3.6 percent from 2009-2035, compared with 3.1 percent from 1990 to 2009, higher than seen in last year’s report.
Writing by Alex Lawler; Editing by Anthony Barker