The International Monetary Fund (IMF) said on Wednesday that high and volatile oil price is one of the four primary concerns facing the global economic growth.

In its latest semi-annual World Economic Outlook report released before the joint spring meeting of the IMF and the World Bank, the IMF said that, with crude oil consumption somewhat lower than expected in 2005, prices are being increasingly driven by concerns about future supply, with the International Energy Agency assessing both upstream and downstream investment to be significantly below desirable levels.

Looking forward, the full effects of the recent shock of high oil prices may not yet have been felt, especially if producers and consumers are still treating it as temporary rather than largely permanent in nature, it said.

With excess capacity still very low, the world oil market remains vulnerable to shocks, coupled with the recent increase in geopolitical uncertainties in the Middle East, the IMF said. Option market data suggest risks are slanted to upside, with a 15-percent probability of oil prices spiking above 80 U.S. dollars a barrel by mid-2006.

The IMF warned that the adverse impact of high oil prices is likely to be greater than in the recent past, especially if feed-through to core inflation increased. It said that this would be of particular concern for oil-importing developing countries.

The IMF said that this situation underscores the need for progress in improving the medium-term supply-demand balance in oil market, including eliminating obstacles to upstream and downstream investment, strengthening conservation and improving oil market data.

Source: Xinhua