High oil prices have seen oil stocks in OECD countries shrink in 2000 from 1999, touching levels last seen in 1996 when consumption was 6% lower than now. OPEC output by October was 15% higher than a year earlier, but this is unlikely to push prices down significantly before next year, the International Energy Agency (IEA) says. Prices have eased a little since December.
But another report, the OECD’s six-monthly Economic Outlook, says that even if enough crude oil is available to meet demand this winter, there may be bottlenecks in delivering heating oil in some regions. Still, in the longer term, prices are likely to come down substantially, averaging US$21 a barrel in today’s money in 2000-2010, before rising to US$28 by 2020 due to a changing supply-demand balance, the IEA says. But the OECD report warns that governments should be wary of reducing fuel taxes in response to public pressure over high oil prices. This would run counter to environmental policy, given that if governments are to meet their greenhouse gas reduction targets, oil consumption will have to be reduced, and the easiest way to do this is to push the price up.
• OECD Economic Outlook, 2000.
• IEA World Energy Outlook, 2000.
©OECD Observer No 224, January 2001