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Global oil demand to fall lowest in 6 years, IEA predicts

Global oil demand to fall lowest in 6 years, IEA predicts

By Graham Ruddick and agencies

Last Updated: 12:56am BST 11/06/2008

The growth in global demand for oil will be at its weakest for six years in 2008 as record prices and recent reductions in subsidies in developing nations take their toll, the International Energy Agency has predicted.

  Oil prices have soared as fears over global supply grow
The IEA reckons sky-high prices will take their toll on demand

In its monthly report the IEA, an energy advisor to 27 industrialised countries including the UK, cut its previous forecast by 230,000 barrels per day (bpd) and now predicts that oil consumption will grow by 800,000 bpd this year, the slowest since 2002.

For the fifth month in a row the estimate for the total demand for oil in 2008 was lowered to 86.77m bpd, a fall of 70,000.

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  • “The current oil price rally could impinge upon growth prospects,” the report said. “Globally, the high oil price is contributing to inflationary pressures.”

    Oil prices reached a record high of $139.12 a barrel on June 6 in New York, but have since eased to just over $134. India, Indonesia, Malaysia, Sri Lanka and Taiwan have all revised their oil subsidies in the wake of the surge in prices, pushing up the cost of fuel for consumers.

    According to the IEA, the rise in oil prices was “not just about geopolitical risks”, adding that the supply situation “remains tight”.

    The strains on supply today prompted the boss of Russian-based OAO Gazprom, the biggest natural gas company in the world, to predict that crude oil will reach $250 in the “foreseeable future”. Alexei Miller, the chief executive, said at a briefing in France: “We are witnessing a big jump in the price of hydrocarbons.”

    The speculation about future demand and supply comes as the US senate votes on a Democrat plan for extra taxes on the profits of the country’s five largest oil companies.

    Democrat Senator Richard Durbin said: “The oil companies need to know that there is a limit on how much profit they can take in this economy.”

    The Senator also warned that the country faced “a deep recession” if the rapid rise in oil prices was not halted.

    The five oil companies made $36bn (£18.4m) during the first three months of the year and the Democrats want to impose a 25pc tax on profits over what it would a deem “reasonable” amount.

    The bill needs 60 votes to proceed but is being strongly opposed by the Republicans, who believe the best way to control prices is to improve oil and gas production.

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