Nymex crude oil prices fall below US$74 a barrel on Monday in profit taking after surging to a record high of more than US$75 per barrel last Friday and gaining about US$5 last week. However, the future oil prices and its impact on the world economic growth has once again become a major concern to the world.

Same as in the past years, the high oil prices resulted from several reasons such as the strong demand, the geopolitical uncertainties and the low excess oil production capacity.

The soaring oil prices resulted mainly from strong recovery of the world economy beginning from three years ago, leading to a rising demand for oil and there are increasing worries on the lack of enough oil supply in the future.

At present, the global oil demand reached about 82 million barrels a day and will continue to increase in coming years. Meanwhile, the supply remained at almost the same level of demand and put the demand of supply at a fragile balance which can be easily shattered by any bad news in the world oil market, thus pushing the oil prices upward continuously.

Lack of enough excess oil production capacity is another big problem facing the world oil market and is one of the main reasons in pushing the prices higher and higher recently. The amount of excess oil production available in the Organization of Petroleum Exporting Countries (OPEC) is around 1 million barrels a day, only about 1 percent of the world oil demand, according to many analysts.

At the same time, the high oil prices have not seriously hindered the pace of world economic growth and the economy has been increasing strongly in the past two years and is expected to march forward in a quick pace.

In its latest semi-annual World Economic Outlook report released last week before the joint spring meeting of the IMF and the World Bank, the IMF said that the growth of global gross domestic products (GDP), after rising 5.3 percent and 4.8 percent respectively in the past years, is estimated at 4.9 percent in 2006, 0.6 percentage point higher than projected in last IMF meeting held in September 2005. The world economy will only ease slightly to 4.7 percent in 2007.

In despite of the high oil prices in the past years and foreseeable future, the US economy increased 4.2 percent in 2004 and 3.5 percent last year and is expected to increase 3.4 percent this year and 3.3 percent in the next year.

That means the world economy has been adjusting well to the high oil prices in the past 30 years since the two oil crises occurred in 1970s and early 1980s. Many measures including multiplying energy resource, increasing the energy efficiency and building the government strategic oil reserves have helped the world economy greatly in dealing with the impact of high oil prices.

Obviously, the impact of soaring oil prices is still a major concern to the world economy and the IMF has listed the high and volatile oil price as the number one of four primary concerns facing the global economic growth in the future.

The IMF said in the World Economic Outlook report that oil 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.

The Group of Seven industrial countries -- also the major oil consuming countries in the world -- are increasingly worrying about the soaring oil prices and pledged to take more measures.

"We are strengthening the dialogue between oil producers and consumers to further improve market transparency through the release of more complete and timely data on production, consumption and inventories, and for clear reporting of oil reserves," the G7 countries said last week in a statement after their financial leaders met in Washington.

G7 countries "urge investment in exploration, production, energy infrastructure and refinery capacity" and "remain committed to greater energy efficiency, conservation and diversification, which will improve the balance between supply and demand."

(Xinhua News Agency April 25, 2006)