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PARIS: Subsidized Chinese demand for fuel is a central force behind
a major change in the US lifestyle: Americans are at last turning to
small diesel cars, the International Energy Agency (IEA) said last
week. The effect of high oil prices on inflation, consumer spending
and growth are evident but complex, it added.
The IEA is an offshoot of the Organization for
Economic Cooperation and Development (OECD).
It explained that although oil prices in current
and inflation-adjusted terms have reached record levels, the real
burden on the global economy is lower than in the 1980s. But the
effect on many poor countries is severe, according to the IEA.
The global amount spent on oil relative to
global economic production “has not yet reached its early 1980s
peak” but high prices were stoking inflation, may delay recovery
of the US economy and “in some non-OECD countries the cost of
imported oil and/or subsidies is becoming unbearable,” said the
IEA.
The current energy squeeze is fundamentally
different from the oil crises of the 1970s and 1980s because it is
driven by a “demand shock” rather than supply factors.
In its monthly assessment of trends in the oil
market, the IEA explored whether high prices might lead to “demand
destruction.” The IEA said that this “will depend mostly on
whether China and the Middle East, which account for almost
three-quarters of global oil demand growth, substantially modify
their administered price regimes,” a reference to subsidies.
US oil demand was expected to fall by about 2.5
percent to 20.3 million barrels a day in 2008.
“More interestingly, even if economic
conditions were to improve sharply, it is unlikely that US
demand—largely driven by transportation fuels, notably
gasoline—would rebound sharply,” the IEA said.
“Indeed, the US seems to be entering a
‘post-Hummer’ period—the gradual switch away from SUVs and
light trucks to smaller, more efficient vehicles, largely prompted
by the perception that oil prices will remain high,” it added.
In April almost one in five vehicles sold in the
US was a compact or subcompact compared to one in eight 10 years ago
when demand for SUVs peaked. In the first four months of this year,
sales of SUVs were 25 percent below the figures 12 months earlier.
The trend could be boosted by tighter federal
regulations for fuel efficiency and, according to the IEA, “by the
adoption of diesel-fueled passenger cars—unthinkable in the recent
past but now gaining attention.”
-- AFP
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