Current oil prices lower than 1980: BP

The Jakarta Post, Jakarta

The recent surge in oil prices that recently reached a high of US$40 a barrel in real terms was actually half the price level reached in 1980 due to a weaker dollar and adjustments for inflation, Europe's leading energy firm BP Plc announced.

Michael D. Smith, BP's head of energy analysis, said oil prices in 1980 would be equivalent to $80 a barrel today.

"In adjusted-inflation terms the oil price of $40 a barrel is only half the level of 1980," Smith said during the launching of BP's Statistical Review of World Energy on Wednesday.

Oil prices shot up to a 21-year high at $41 a barrel on concerns over a lack of supply due to security problems in Iraq and stronger global demand.

Smith said it was possible for oil prices to dip back below $30 a barrel in the next 18 months.

BP also pointed out that oil prices in nominal terms had their highest ever average in 2003. Brent crude averaged $28.83 a barrel.

Aside from the war in Iraq and supply disruptions in oil producing countries such as Nigeria, there were other events in the past 18 months which had led to the stronger oil prices, Smith said.

Strong oil demand from China and the shutting down of Japanese nuclear power plants in 2003 had contributed to increasing global oil demand.

The review noted that oil was still the primary energy source for most people. Oil consumption grew strongly in 2003 despite high oil prices. Consumption grew by almost 1.5 million barrels a day (bpd), or 2.1 percent, which was above the 10-year annual average growth rate of 1.6 percent.

Total oil output from the Organization of Petroleum Exporting Countries (OPEC) increased by 1.88 million bpd. Most of that output increase came from the world's top oil producer Saudi Arabia whose production rose by one million bpd to hit a 22-year high of over 9.8 million bpd.

Oil output from countries outside OPEC grew by 830,000 bpd in 2003 which was lower than the 1.33 million bpd in 2002. But it was still above the 10-year average.

Smith said discoveries of new reserves could still compensate for the high consumption.

"While production continued to be replaced, through a combination of new discoveries and existing reserves, the challenge, of course, is to invest adequately in order to develop future reserves," he added.

While oil consumption remains strong, world natural gas consumption weakened by 2 percent in 2003 because U.S. consumption, which is the world's largest market, contracted by almost 5 percent.