Head of the IEA warns of wild crude oil price swings

4 March 2010 4 March 2010

BonTrade

Countries must brace for a return to wild oil price swings as the global economy recovers, the head of the IEA has warned. “Volatility has receded compared to the roller coaster of 2007 and 2008,” Nobuo Tanaka told reporters on the sidelines of an energy forum in Tokyo.

“But the market could easily become again more volatile once the world economy grows again and oil supply tightens.” Among factors that would induce volatility, Tanaka cited the absence of fruitful negotiations over tackling climate change as well as persistent uncertainty over the outlook of many economies.

According to a scenario offered by the Paris based IEA, which represents the energy interests of 28 developed economies, oil prices may climb to $100 a barrel in 2020 and up to $200 in 2030.

The rise would be less if measures are taken at a global level to improve energy efficiency, according to the agency. “The cheap energy age is over and we have to prepare for that in the government and private sector,” said Tanaka.

He urged governments to open access to energy reserves and said “encouraging investment on the production side could lessen volatility.”

The IEA held a two day forum recently to examine potential policies and regulatory measures aimed at increasing oil market transparency. World oil prices jumped to $80 in trading on Wednesday.

Crude oil prices surged to $147.50 per barrel in July 2008 before tumbling to $35 five months later in the eye of the financial storm.