The worldfaces "a permanent oil shock" and will have toadjust to sustained high prices in the next two decades, the International Monetary Fund said yesterday in the starkest official warning yet about the long-term outlook for energy supplies.
Predicting surging demand from emerging countries and limited new supplies from outside the Organisation of the Petroleum Exporting Countries after 2010, Raghuram Rajan, IMF chief economist, said: "We should expect to live with high oil prices."
"Oil prices will continue to present a serious risk to the global economy," he added.
In its World Economic Outlook, the IMF forecast crude would cost $34 a barrel in 2010 in today's money and would rise to $39-$56 a barrel in 2030.
The predicted prices are well above market and oil industry expectations. They are also much higher than the latest long-term forecast from the International Energy Agency, the oil watchdog, of real oil prices of $27 a barrel in 2010 and $34 a barrel in 2030.
"The shock we see is a permanent shock that is going to continue . . . and countries need to adjust to that," said David Robinson, deputy IMF chief economist.
The IMF called on emerging countries in Asia, which this year would account for 40 per cent of the increase in oil demand, to curb their fuel subsidies. Countries including China and Malaysia, have recently increased petrol prices in an attempt to reduce consumption.
The IMF based its forecast on a sharp rise in global oil demand, particularly from increased vehicle ownership in China, and non-Opec production reaching a plateau around 2010.
It expects oil demand to grow at a yearly rate of 2.1m barrels a day - above the 1.5m b/d the market considers sustainable - to reach 138.5m b/d in 2030.
Some analysts are sceptical about the IMF's projections, pointing out that no other international body shares its view.
But the IMF's report paints a gloomy picture for energy consumers: "With global dependence on oil production from Opec countries rising, much would depend on Opec supply response; most likely however, there would be growing upside risk to prices."
It estimates that the cartel, which controls 40 per cent of global oil production, would need to invest about $350bn (£186bn) to 2030 in new installations.
The IMF warning came as the US Department of Energy yesterday raised its oil price forecast in 2005 and 2006 to about $55 a barrel, up more than $6 from last month. US crude futures were flat in late afternoon trade yesterday at $55 a barrel.
The European Central Bank yesterday also signalled its concerns about the impact of soaring oil prices. Jean-Claude Trichet, ECB president, described higher oil prices as "very unwelcome for global growth".
