The International Monetary Fund has warned that countries should be ready for dwindling oil supplies that could drive prices skyward as demand increases, especially in emerging market economies.
'The persistent increase in oil prices over the past decade suggests that global oil markets have entered a period of increased scarcity,' the IMF said in a report on the global economy.
In its twice-yearly World Economic Outlook (WEO), the fund blamed this on the failure of oil supplies to keep up with rapid growth in oil demand in emerging economies.
Recent unrest in Libya and other Arab countries has driven prices sharply higher this year. On Wednesday, London's benchmark Brent crude reached $123.37, the highest level since early August 2008.
The IMF did not forecast oil prices - that will come with its overall economic forecasts to be released next Monday. But it said those forecasts assumed that the tension between scarcity and demand 'will be resolved with oil prices around current high levels'. It noted that petroleum accounts for about 10% of global trade.
In general, the IMF said, a progressive dwindling of supply was more likely than a sudden drop.
The IMF urged authorities to prepare buffers for large, unexpected scarcity of oil by reviewing current policies to determine whether they can adapt quickly to supply shocks.
In addition, it said, 'consideration should be given to policies aimed at lowering the risk of oil scarcity, including through the development of sustainable alternative sources of energy'.
Oil prices mixed after new Japan quake
Brent crude oil prices dipped this evening, as investors worried after five days of gains that oil had become expensive enough to hit economic growth and cut demand.
Prices also came under pressure after a major earthquake struck Japan, the world's third largest economy still reeling from last month's earthquake and tsunami.
Brent dipped 15 cents to $122.16 a barrel, having hit a two-and-a-half-year high of $123.37 on Wednesday. US crude rose 56 cents to $109.39 a barrel, helped by US government data showing that weekly claims for unemployment benefits fell slightly.
As expected, the European Central Bank lifted interest rates for the first time since the 2008 financial crisis. This added to worries about erosion of oil demand after China also lifted interest rates this week.
