Expensive energy, including the prices of oil, gas and coal at “multi-year” highs, pose a threat to economic growth worldwide, particularly to emerging market economies that are also seeing depreciations of their currencies, the International Energy Agency said Friday.
The agency showed particular concern that with peaks in both crude oil production and crude oil demand, both at nearly 100 million barrels per day, the spare capacity of the world has been reduced “to only 2 percent of global demand.”
“This strain could be with us for some time and it will likely be accompanied by higher prices, however much we regret them and their potential negative impact on the global economy,” the agency said in its report.
“For many developing countries, higher international prices coincide with currencies depreciating against the US dollar, so the threat of economic damage is more acute,” it added.
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“Just had a good discussion with India’s Petroleum Minister Dharmendra Pradan. We agreed that high oil prices are hurting consumers and that extra barrels will need to come to the market soon to avoid further tightening,” Fatih Birol, executive director of the Paris-based International Energy Agency, said Friday in Twitter.
According to the IEA report, both global oil demand and supply are now close to new, historically significant peaks at 100 million barrels per day, and “neither show signs of ceasing to grow any time soon.”
Brent crude futures traded Friday afternoon at $80.67 per barrel, up from $57.17 per barrel on Oct. 13, 2017.
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A sharp depreciation of currencies in August of some emerging markets, particularly Argentina and Turkey, sparked concerns that the situation could spread to other countries.
In addition to currency depreciation, some emerging markets are exposed to higher debt servicing payments as the U.S. dollar strengthens along with interest rate increases. Trade disputes can also impact their economic growth.