Rising oil prices hurt consumers, dent fuel demand: IEA chief

Rising oil prices are not only impacting consumers negatively, they could also have adverse implications for oil producers, Reuters reported on Tuesday quoting Fatih Birol, International Energy Agency’s (IEA) executive director.

“Many countries’ current account deficits have been affected by high oil prices,” Birol said at an energy conference in Singapore, referring to the rising current account deficits in some countries, such as India, due to high import cost of oil.

He said there are two downward pressures on global oil demand growth -- one is high oil prices, and in many countries they’re directly related to consumer prices. The second one is global economic growth momentum slowing down.

Birol said the effect of high oil prices will be compounded in Southeast Asia as demand is rising fast but production is falling, resulting in the region becoming a net importer of oil, gas and coal, according to Reuters.

However, he said fuel consumption is expected to grow despite high prices and despite the rise of electric vehicles.

“Global oil demand will continue to grow even amid the rise of electric vehicles as they are governed by petrochemicals, aviation, among others,” he said.

Last week, the IEA released a new study that noted major oil and gas exporters face unprecedented challenges in years ahead. These include rising production from new sources such as shale, uncertainties over the pace of oil demand growth and deployment of new energy technologies.

“More than at any other point in recent history, fundamental changes to the development model of resource-rich countries look unavoidable,” Birol said last week when IEA released a special report.

“Following through with the announced reform initiatives is essential, as failure to take adequate action would compound future risks for producer economies as well as for global markets,” he said.