Home / Business / News Tools: Save | Print | E-mail | Most Read | Comment
Warning on high global oil prices
Adjust font size:

World Bank economists yesterday warned global oil prices would not drop significantly in the coming months but said China has been successful in controlling inflation.

"You don't expect oil prices to come down sharply," said Hans Timmer, lead economist and manager of the Global Trends team of the World Bank.

In the Bank's Global Development Finance report released this month, it forecast oil prices could average $108 a barrel this year before dropping to $105.5 and $98.5 a barrel next year and in 2010.

Oil prices hovered around $136 a barrel yesterday. Timmer said the forecast could be inaccurate because of the volatility of oil prices. "It's incredibly difficult to forecast oil prices in the current circumstances and there are upside risks for the forecast."

The current problem is "disappointment" in the supply side, Timmer said. "The reasons for the rising oil prices are fundamentals, not speculation."

Producers outside the OPEC have failed to increase output while OPEC, which produces about 40 percent of the world's output, even reduced production last year, Timmer said.

The solution to this problem lies in changes in the overall policy as well as improvement in energy efficiency, the economist said, pointing out that China's move last week to raise oil product prices is in the "right" direction.

Many analysts, however, warned that it may exacerbate the country's inflation, which was 7.7 percent year-on-year in May, down from 8.5 percent in April. Although May inflation was down, it is still significantly higher than the official target of 4.8 percent for this year. Economists generally forecast the whole-year figure could be above 7 percent.

Moreover, the May producer price index, which measures factory-gate inflation and largely reflects the consumer inflation trend, rose 8.2 percent, the highest in more than three years.

Timmer said Chinese policymakers must prevent oil-induced inflation from spreading to other sectors and triggering new bouts of price rises - the so-called "second-round effect".

Louis Kuijs, senior economist of the World Bank Beijing office, said China's tight monetary policy has been successful in containing the spillover of commodity-driven price rises into a more generalized inflation.

(China Daily June 24, 2008)
Tools: Save | Print | E-mail | Most Read
Pet Name
China Archives
Related >>
- Index drops as inflation concerns spread
- Zhou signals firmer policies on inflation
- Top economic planner calls for check on inflation
Most Viewed >>
- China's 1st coalbed methane pipeline underway
- Iraqi nod to Chinese oil firms
- Number of China's credit card holders doubles in quarter
- Baosteel to pay almost twice for ore
- State asset law under 2nd review
- Output of Major Industrial Products
- Investment by Various Sectors
- Foreign Direct Investment by Country or Region
- National Price Index
- Value of Major Commodity Import
- Money Supply
- Exchange Rate and Foreign Exchange Reserve
- What does the China-Pakistan Free Trade Agreement cover?
- How to Set up a Foreign Capital Enterprise in China?
- How Does the VAT Works in China?
- How Much RMB or Foreign Currency Can Be Physically Carried Out of or Into China?
- What Is the Electrical Fitting in China?