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High Oil Prices Unlikely To Last: ADB Expert

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Tianjin, China (AFP) Jun 26, 2005
High oil prices might not be maintained this year partly because speculation is a factor in the surging cost of the fuel, an expert at the Asian Development Bank (ADB) said Sunday.

"I doubt if the current very high level of oil prices will be maintained for the rest of the year," said Masahiro Kawai, a Manila-based economic adviser to the president of the ADB.

"The main reason for rising oil prices is that there's a higher demand for oil in relation to supply... There is also some speculative activity going on in the oil market, so this current high oil price may not be sustained for a long time."

He was speaking at an Asia-Europe Meeting (ASEM) of finance ministers, which brought ministers and other policymakers from 38 countries to the northern Chinese city of Tianjin.

But Kawai said it was "very difficult" to predict how long prices will stay high.

There were other factors for the price increase, including geopolitical risks in the Middle East and rapid economic growth in emerging market economies like China, which is adding to the growing demand, Kawai said.

"China may not be the major factor, but China is a factor," Kawai said.

At their meeting, the finance ministers called Sunday for increased production to curb the rising cost of oil.

World oil prices closed Friday just short of the 60-dollar mark, sparking worries that the high cost of fuel will slow economic growth, inflating prices and wages.

Oil producing countries will need to raise production and be more price responsive, he said.

Oil refinery companies may also have to increase their capacity to produce high-quality oil, Kawai said.

Consumer nations also need to become more energy efficient and practise energy conservation as well as use alternative sources of energy, he said.

Continuing price rises will likely negatively affect the global economy, shaving perhaps a small fraction of one percentage off the GDP growth rate, Kawai said.

"But the impact could be bigger on very poor countries, poor oil consuming countries such as Cambodia," Kawai said.

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