Fears grow high oil prices will hit world economic growth
By Brian O'Mahony, Chief Business Correspondent
FEARS are growing the 44% hike in oil prices over the past year will damage global economic growth.
Business in the US is getting pessimistic as oil per barrel hovers around $64 per barrel.
Pfizer Inc chief executive, Hank McKinnel, said: "If oil prices remain high, consumers will be forced to continue to spend more on petrol and heating oil, and this could trim other expenditures."
Hurricane Katrina and soaring energy prices may take the steam out of a worldwide rebound in manufacturing economists were counting on to spur growth later this year.
The hurricane is compounding the effect of the higher fuel costs that had started to weaken consumer demand and undermine manufacturing in August.
Major production indicators, particularly in the US, faltered in August after posting solid gains in May, June and early July.
Chief executive of Eaton Corp, a manufacturer that does business in 125 countries, Alexander Cutler, said: "Even before Katrina, there was evidence of some loss of momentum as a result of rising energy prices."
US industrial production rose 0.1% in July, and the Institute for Supply Management's factory index unexpectedly fell in August, showing manufacturing was already beginning to slow as energy costs surged.
Meanwhile, global oil production is near peak and is set to decline within a few years, a report warns.
This at a time when demand from 85% of the world is still rising while it is estimated a third of the world's oil now comes from declining oil fields.
Serious measures must be implemented to cut demand according to the report: 2007: Solving Peak Oil, which outlines the technical and policy steps needed to meet the challenge. It attempts to cope with the impending crisis and argues that tried and tested and cost-effective technologies can be implemented quickly to reduce oil consumption.
If done in line with falling oil supplies, it can prevent a major disruption of global transport without major disruption to society.
By 2010, oil production will have fallen to 82 million barrels of oil per day from 85mbpd at present.
It will be 65mbpd in 2020. Half of global oil consumption is used by the transport sector and the majority of that on our roads.
The global airline industry is expected to suffer losses of $7.4 billion (€6bn) this year owing to the latest surge in oil prices in recent months.
It has been in loss for five years, with the latest deficit coming on top of cumulative losses of $36bn (€29.3bn) suffered in the four years 2001-04.