SINGAPORE (Reuters) - Governments in emerging Asian economies will struggle to secure their rising energy needs as rapidly swelling demand in leading consumers China and India outpaces growth in supplies, which is likely to keep oil prices over $100 a barrel.
High fuel costs for importers are threatening their economies as they grapple with rising subsidy bills and inflation.
The fuel burden, with oil imports costing around 5 percent of gross domestic product, is weighing on economic growth, said Richard Jones, deputy executive director of the International Energy Agency.
“It’s particularly sensitive in emerging markets, India is a country that has got a particularly high oil burden, they import a lot,” Jones said.
The rise in prices has been partly blamed on the growing energy appetite of Asian nations. China, the world’s second-biggest economy, has driven oil demand growth for a good part of the past decade. India is also competing to secure scarce energy resources for its billion-plus people.
The global economy needs to see lower prices, Nobuo Tanaka, former head of the International Energy Agency, said.
“If $100 oil continues, it will be as bad as 2008,” Tanaka told the Singapore International Energy Week (SIEW) conference.
Brent prices have averaged over $111 a barrel so far this year, sharply up from an average of around $80 in 2010. The front-month contract hit a high of $147.50 in July 2008, just ahead of the global financial crisis of that year.
Brent at over $100 would cut global oil demand by around 1 million barrels per day (bpd) from what fuel consumption would be at a price of $70 to $80 per barrel, Tanaka said. That would slice more than 1 percent from total world fuel consumption.
Brent will average $106.80 per barrel next year and $108.60 in 2013, a recent Reuters poll of 35 analysts showed, as demand for fuel from China and other emerging economies keeps the global oil market tight. <O/POLL>
The burden of high energy costs on growth contributed to the sharp slowdown in the global economy in the wake of the 2008 financial crisis. High prices led to such a sharp slowdown in fuel demand that oil producer group OPEC was forced to make record output cuts.
The oil minister for the United Arab Emirates did say producers can tolerate a further fall in oil prices to $80-$100 a barrel, the first indication of a preferred price range from a Gulf Arab producer since OPEC talks collapsed in June.
High oil prices would help guarantee future supplies, UAE oil minister Mohammed bin Dhaen al-Hamli said, by encouraging more investment in crude production capacity, which would mean less volatile prices.
“We need a reasonable price to continue building capacity,” Hamli told the conference.
“The higher the capacity, the less fluctuation in prices.”
The UAE, one of three Gulf OPEC producers with spare capacity, is pumping at 2.5 million barrels per day (bpd) from capacity of 2.7 million bpd, Hamli said, having upped output to help meet a supply shortfall from Libya.
The Arab Spring and the disruption to Libya’s oil output have added to the difficulty policy makers face as they search for secure oil supplies.
“The recent spate of unrest in the Middle East and North Africa has generated doubt over the reliability of energy supplies from the region,” said S Iswaran, minister in the Singapore Prime Minister’s office.
“These events have caused increased volatility in energy markets and prices, heightening the policy challenge of governments to secure reliable and affordable energy supplies to sustain growth.”
Oil prices are not expected to decline in the longer term, the CEOs of two major oil companies said at the conference.
“Oil prices will not come down for quite a long time,” said Shell CEO Peter Voser, while Petrobras Chief Executive Jose Gabrielli said he didn’t see a reason for a price decline in the next 5 to 10 years.
Additional reporting by Simon Webb, Jessica Jaganathan, Luke Pachymuthu, Randy Fabi; Writing by Manash Goswami; Editing by Michael Urquhart and Clarence Fernandez