A draft of the International Energy Agency’s 2011 World Energy Outlook expresses concern about the implications of the recent jump in oil prices on the global economy.
At the end of September 2010, Brent oil prices were at $82 a barrel. But as the conflict in Libya heightened and eventually choked off the supply of Libyan oil on the market, prices shot up to a high of $127 a barrel in April of 2011.
The draft stated that “the dramatic rise in oil prices since September 2010 has added to doubts about near-term economic prospects.”
The 28 member countries of the IEA are required to store enough oil stocks for 90 days of consumption. But for the third time in its 37-year history, the IEA had to release 60 million barrels of oil in response to the loss of Libya’s oil exports.
However, the civil war in Libya is only one contributor to higher oil prices. The IEA notes that conflict in the Middle East and North Africa in general, or the Arab Spring, is fuelling continued unrest in the global economy, which may increase oil prices even further.
Richard Jones, executive director of the IEA notes that “an oil burden of more than 5 percent of the gross domestic production is worrying. The last time we saw that was in 2008, and we all know what happened.”
If the recent news tells us anything about energy consumption, it’s that we should be shifting towards renewable energy as soon as possible. Not only will the price of oil continue to go up into the future, but it will continue to be shrouded in political unrest and geopolitical conflicts. And as the price of renewable energy becomes increasingly attractive, countries that have invested in green energy early in the game will be most competitive in the future global economy.
Image CC licensed by Clay Junell