An Era of Oil Scracity (IMF)

The recent spike in oil prices suggested that the global oil market had entered a period of increased scarcity, while global capital flows to emerging markets surged after the crisis, the International Monetary Fund (IMF) said on Thursday.

"The origins of this scarcity can be traced to the tension between the upward shift in global oil consumption growth due to fast-growing emerging market economies and supply constraints, which have led to a downshift in oil supply growth," the IMF noted in a report.

Scarcity is reinforced by the low responsiveness of both oil demand and oil supply to price changes, especially in the short-to- medium term, according to the analytic chapters of the World Economic Outlook (WEO) report released prior to the Spring Meetings of the IMF and its sister agency, the World Bank, scheduled for later this month.

The IMF said it would be premature to conclude oil scarcity would significantly constrain global growth, adding that moderate increases in oil scarcity consistent with supply projections by others might only serve as a minor drag on growth in the medium to long term.

An unexpected sizable downturn in oil supply trend growth of 1 percentage point would slow annual global economic growth by less than 0.25 percent in the medium and long term, according to the WEO report.

The Washington-based agency suggested that policy consideration should be given to moves aimed at reducing the risk of oil scarcity, including developing sustainable alternative sources of energy.

The report also noted that net capital flows to emerging market economies rallied in a strikingly short span of time after the global financial crisis, while the rebound was "more extraordinary in terms of its pace rather than the level capital flows reached."

The IMF argued that capital flows to emerging market economies seemed to move in line with global financing conditions, as net flows to emerging market economies rise sharply in periods of easy global financing conditions in particular.

The report also noted that greater direct financial linkages with the United States entailed a bigger effect of U.S. interest rate changes on net capital flows.

© english.news.cn / 04-08-2011