The world’s richest energy consuming nations on Tuesday called for measures to curb their dependence on unreliable and expensive imports as near-record oil prices show signs of stifling the global economy.
The United States, Europe, China and Japan were among those represented at a meeting of the International Energy Agency, the energy arm of the Organization of Economic Co-operation and Development, to protect the interests of consuming nations.
“We think the high price of energy -- oil, gas and coal --is hurting the economy, less in OECD countries but more in the less developed countries,” Claude Mandil, head of the 26-nation IEA said after two-day ministerial talks on supply security.
“That’s a problem which is not affordable in the long term.”
Speaking during parallel ministerial talks at the OECD, the think tank’s chief said high oil prices had not yet, however, translated into a sharp acceleration in global inflation.
“To everyone’s surprise, oil prices have not yet spilled over in any meaningful way into the economy at large, certainly not in terms of inflation,” the OECD’s Donald Johnston said.
Economists increasingly blame high energy costs for what seems to be an unexpected slowdown in the European economy. The U.S. economy has also lost steam and grew at its slowest pace in two years in the first quarter.
On Monday, worldwide surveys of manufacturers showed factories in the United States and Europe shifted down another gear in April, indicating an oil-induced soft patch in economic activity persisted into the second quarter.
The United States, the world’s largest consumer, indicated on Tuesday that high oil prices could be around for years.
“Energy security is a challenge not only for the United States, but for all nations as demand continues to grow around the world,” U.S. Energy Secretary Sam Bodman said in Paris.
“Energy markets as exemplified by current oil prices are really a global problem that was many years in the making and undoubtedly many years in solving,” he told reporters.
Analysts say chronic underinvestment, together with rising demand and reduced spare oil capacity drove oil prices in April to a record high above $58 a barrel.
Prices have since fallen back to $50, calmed by increased output from the Organization of the Petroleum Exporting Countries that has helped to increase stocks in the United States, the world’s largest energy consumer.
But oil is still around two thirds more expensive than when the IEA last held a ministerial meeting in Paris two years ago.
In a communique, the IEA said investment was key to calming oil prices. “Energy markets require both timely investment and sufficient stocks to absorb unpredicted yet inevitable surprises.”
The energy body has said $16 trillion needs to be invested over the next quarter of a century to ensure supplies and that spending is not on track.
“Investment is lagging not only in the oil sector upstream but even more in the downstream and gas and electricity,” Mandil said.
The IEA is also calling for ways to curb energy import dependence, raise fuel efficiency and reduce the environmental impact of the world’s growing reliance on fossil fuels.
It has published a report called “Saving Oil in a Hurry,” which includes proposals, including car sharing and potentially unpopular driving restrictions, that could shave one million barrels per day from industrialized nations’ oil demand.
Some analysts were skeptical.
“I’m not sure that this will have any impact on demand in the short to medium term,” said Frederic Lasserre of SG Commodities. “I think that the price would make more impact on demand than any political decision.”
Australian Energy Minister Ian Macfarlane, who chaired the IEA ministerial meeting, said no specific targets had been set on curbing energy demand, but a variety of proposals had been discussed to improve efficiency.