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Despite crude oil already trading on the world markets at a historically high level of $113 a barrel, the International Monetary Fund (IMF) has been warned by its internal research team that in the next decade oil prices could climb to a permanent level double that which we are experiencing at the moment.
The increase could have a dramatic effect on global trade of all kinds, as the report, entitled The Future of Oil: Geology v Technology, warns that the prices will be “uncharted territory for the world economy, which has never experienced such prices for more than a few months.”
The report announces that predictability in global oil markets has been historically low, but that their models have been consistently more accurate than the rest in the field, “our empirical results also indicate that if the model's predictions continue to be accurate as they have been over the last decade … the future will not be easy.”
“While our model is not as pessimistic as the pure geological view that typically holds that binding resource constraints will lead world oil production on to an inexorable downward trend in the very near future, our prediction of small further increases in world oil production comes at the expense of a near doubling, permanently, of real oil prices over the coming decade.”
The report contains a warning that it does not represent the views of the IMF, and should not be reported as such, but nevertheless it was by written by several renowned authors including Jaromir Benes, a former head of macroeconomic modelling in the Czech National Bank but now employed by the IMF in Washington.
By. Charles Kennedy of Oilprice.com
Charles is a writer for Oilprice.com