China, India to blame for high oil prices

Oil prices have recorded sustained sharp increases over the past few years because of a surge in Asian demand and they could remain high in the near future, according to the Oxford Institute for Energy Studies (OIES).

China and India have emerged as the main factors in the price increase given the continued high growth in their economies despite the surge in prices and fears they could stifle economic growth, said Christopher Allsopp, Director of the US OIES, one of the world’s best known energy and economic analysis centres.

Allsopp, who attended a recent economic conference in Abu Dhabi, dismissed statements by OPEC and other groups that speculation has to blame for the surge in oil prices that smashed through $100 two weeks ago.
“ There have been a lot of theories and analytical assumptions and projections about why oil prices have been very high…I don’t think speculation and geopolitical tensions are the main reasons…I believe it’s the high demand for oil demand in Asia, mainly in China and India,” he said.

“Demand in these two countries has been growing very fast and will continue to grow fast because their economies are growing fast. This means oil prices will remain high but I can’t tell you for how long and how much… Oil prices could plunge again only if the economy of China or India collapses.”
Allsopp said he did not know where oil prices are exactly heading in the coming years on the grounds “it is impossible to predict their level due to many factors.”

“There are numerous factors that determine oil prices…I don’t know where they are heading right now, never mind in the future…but I see a new era of high oil prices because the world economy seems to have absorbed this increase…the situation now is different and demand is more than matching supply…I also can not tell you what is the best oil price for the consumers, producers or the world economy. The price is determined by the market so let the market say what is the best and most reasonable price,” Allsopp said.

“What makes me believe oil prices will remain relatively high is that supply from non-OPEC is leveling off and the bulk of the increase in production has to come from OPEC, especially the Middle East, in the long term….for this reason, I believe it is very important that Middle East producers pump sufficient funds into capacity projects to meet the growing demand, mainly in China and India.”

In a recent study, the 13-nation Organisation of Petroleum Exporting Countries (OPEC) said world oil demand is projected to surge by nearly 34 million barrels per day in 25 years and China and India will lead such growth.

Demand will grow at a slower pace in the United States and other industrial giants while it is expected to decline in West Europe, OPEC said.