The World Bank's chief economist, François Bourguignon, said oil prices, which hit nearly $50 a barrel that week, would settle near $30 within a few months. Speaking to the Spanish financial newspaper Cinco Días, he argued that higher prices would pull idle wells into production, expanding supply and driving prices back down.
Bourguignon traced the run-up to a combination of genuine demand, led by China's growth and recoveries in the United States and Japan, and speculation tied to uncertainty over Russia's Yukos oil company and Venezuela's referendum. He dismissed Iraq as a significant factor, noting the country had not been a major producer before the 2003 US-led invasion.
London market analysts estimated that anxiety over Iraq had added a security premium of up to $15 per barrel. That sentiment-driven pricing was on display when a fire at the already-offline Kirkuk terminal briefly pushed prices higher.
Sustained high prices could trim a fraction of a percent from global growth each year, Bourguignon said, with developing economies hit hardest. IMF chief Rodrigo Rato, speaking separately, put world growth at about 4.6 percent and similarly attributed the price spike to speculation rather than a physical shortage of supply. OPEC output was at the time approaching 30 million barrels a day.
Historical summary. TurkishPress restated this AFP wire report, first published in August 2004, in its own words.