Crude oil prices have surpassed the desired price range of 70 to 80 dollars per barrel -at which they hovered for several weeks-, as the price is currently within the 80 to 87 dollars range. It is also clear that prices are on the rise in the foreseeable future. “OPEC would pump more oil to prevent a rally in oil prices above $100 from hurting the global economic recovery”, said Kuwaiti Oil Minister Sheikh Ahmad Abdullah Al-Sabah in a statement he gave last week to Reuters. This statement is in fact very significant, as it invokes the price of one hundred dollars or more once again, and the possibility that OPEC will boost its output of crude oil to prevent the price from rising to very high levels. Reactions to high prices have already begun, as we are currently witnessing strikes and protests in more than one country, the most recently of which was in India. There are concerns that high prices would also affect the recovery from the sequels of global financial crisis. However, the fundamental question that must be asked here is: Why is this hike in prices taking place? The answer in fact lies in an important trend, which is that the meteoric rise to 147 dollars for the barrel in 2009, and then during the global financial crisis, did not adversely impact the structure of the demand for oil and its inherent trends over the long-term. In fact, information available to the International Energy Forum (based in Riyadh) indicates that the major decline in demand for oil is limited to Europe this year, while demand for oil has grown by nearly 640 thousand barrels per day in other Western industrialized countries, compared to last year's levels. This means that the overall decline in oil demand in the OECD countries (Western industrialized countries) since last year is estimated at around 210 thousand barrels per day. The information available also indicates that Chinese demand for oil is continuously on the rise. Other indications that demand will continue to increase include the recent forecasts issued by the International Monetary Fund (in its biannual report), which conclude that the global economy will grow by approximately 4.2 percent this year. The report also predicted that the recovery in many developed countries will remain “lukewarm”. According to the IMF's forecasts, growth in the United States will be high (3.1 percent), but limited in the Euro zone (around one percent) and Japan (1.9 percent). However, the largest growth will take place in the emerging Asian economies (around 8.7 percent, with 10 percent growth in China alone). The IMF also believes that the prospects of economic growth in the Middle East are ‘favourable', owing to the economic revival policies in place there. Despite the differences in the growth rates among the countries of the region, the overall GDP of the Middle East and the Arab Maghreb is expected to rise by 4.5 percent this year. In truth, the IMF attributed this increase to the rising prices of commodities and the foreign demand that stimulates production and exports in many countries of the region. As for demand on petroleum products, China overtook Japan in that regard, becoming the world's second largest oil consuming country. In parallel, Shell predicts that China will also overtake Japan in the consumption of natural gas by 2015. In 2015, China will become the largest gas market in Asia. Shell also forecasts that the consumption of gas will increase worldwide by about two percent, and that the overall worldwide consumption of gas will rise to 4.5 trillion cubic metres annually by 2030. Also, demand for liquefied gas in particular would rise by about six to eight percent each year, especially in China and other Asian countries, but also in certain Middle Eastern countries. In fact, these studies and statistics point out to major transformations in the international oil and gas industry. Despite the continued high consumption in Europe and the United States, the main growth is taking place in the East (China, Asian countries and the Middle East) in addition to the emerging countries in Latin America, such as Brazil. This radical change in the main trends of the oil and gas industry has many commercial and geopolitical implications in the long-term, and will also leave its marks on oil prices which have hitherto been largely controlled by the markets in North America and Europe. As an aside, it must be noted here that a large and rapid increase in prices again will have many negative implications on the exporting countries, regardless of the massive revenues that this will incur. This is because of the competition they would face in such a scenario from alternative energies, which will be economically competitive, should oil prices rise or fluctuate. In truth, these alternatives have now become a realistic competitor of oil, which cannot be ignored as was the case in the past. *. Mr. Khadduri is an energy expert
