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Sentance warns of oil price shock
21.09.09
The oil price will stay high for the next decade and could be the cause of the next "big global shock" in the worldwide economy, according to Andrew Sentance, one of nine economists at the Bank of England charged with keeping a lid on inflation.
In a speech to energy industry economists in London today he said: "I can see substantial upside risks to [energy] prices over the coming recovery as demand picks up across the global economy and Asia plays a leading role in the growth of the world economy. Against the background of supply constraints, this creates the potential for continuing price volatility.
"I do not see supply developments and environmental policy moves changing the energy price environment until much later in the next decade." The price of oil has been at or around $70 a barrel for the past two months.
Sentance, a member of the monetary policy committee, added: "If [economic] stability does return, we need to be looking very carefully to see where the next big global shock might be coming from. The energy market is one of the prime candidates."
Reader views (4)
We have hit Peak resource = too many people chaseing too few resources.
All the easy get at able oil has been found...so the stuff we find now is more expensive to extract and refine, increasing prices. Increasing scarcity is what we have to look forward to. Welcome to the permanent energy crisis. Until that is society at large wakes up and demands government action on renewables.
The choice is stark. Choose to change and buy time for transition or wait until change is forced by reality causing untold misery for everyone.
- M Spence, London
The global supply of oil peaked last year, permanently.
Only a 3% decline in demand pulled prices back from record highs. When (if) the eoonomy recovers, the world will discover just how much of OPEC's reserve production has already been lost to falling flow rates. Even if we haddn't passed peak, two years of normal growth in demand would see another supply shock. In practive it will take less than that. I repeat - this is a permanent energy crisis.
- Ralph W,, Cambridge
Your having a laugh mate. the world is awash in the stuff to the extent that they are running out of places to store the stuff. There is a huge air pocket under it at $70, where it is being held by speculation. If the equity market market turns down a fraction you watch it will be at $50 in 2 weeks.
- Paul Kingsley, Gibraltar
In my opinion it was the cause of the most recent market crash. I had a business where I spent more on fuel every week than I earnt. People should realise that for every £100 that they spend on Fuel the majority goes on Tax. This Tax is most unfair, if forinstace you spend £5 per day on fuel going to work, £4 of it goes in Tax, which means you are being taxed to go to work.
- Jim Allan, Lake District
