During the last twelve months, world oil prices averaged at a stubbornly high level around US$ 50 per barrel. Since the beginning of 2005 oil prices have been on an upwards trend, hitting a record price of US$ 68 in late August. The presentation identified the salient demand-and supply-side factors that underlie this global scenario and offers some insights into the way ahead for Sri Lanka.
On the demand side is the unusually sustained strong demand seen in the last few years, driven by the rapid growth in Asian countries, in particular, China and India. The high rate of demand growth is not expected to tail off until 2025, based on OPEC projections. Meanwhile, on the supply side there are indications of a very gradual expansion (slow growing) of OPEC supply capacity and shrinking of the world refining capacity. Forecast increase in non-OPEC supply is also expected to be insufficient to meet the shortfall in meeting global demand.
While OPEC is attempting to take action to remedy the situation, the possibility of further increases in oil prices cannot be ruled out. In this context, the major oil consuming nations are re-evaluating and reconsidering their energy policies according to their own strategic goals and objectives. Alternative sources of energy, and strategies to curb energy demand, are receiving renewed interest. Sri Lanka also needs to seriously address these two issues to minimize the adverse impact on cost of living indicators.
Full presentation (PDF format 158KB)
