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| April 29, 2008 |
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High prices 'here to stay'
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GET used to high crude oil prices, says National University of Singapore economics professor Sam Ouliaris. Here are five reasons why:
Tight supply because of a limited increase in oil output and a disruption in supplies.
Opec's position that it is not raising output.
A declining United States dollar makes oil more pricey, as oil contracts are denominated in that currency.
Speculation in the market because of the presence of hedge funds.
Opec's limited excess capacity (now 2.6 per cent of world consumption).
Other conclusions from Prof Ouliaris:
One long-term solution is to minimise growth in consumption, particularly in the transport sector.
Existing subsidies on crude oil should be removed, to reduce consumption.
Global consumption is likely to rise even faster because of the rapid development of emerging economies.
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