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Why global oil demand has surged
The quick growth of emerging economies is leading to a surge in global oil demand and that of other commodities too, a top US official said on Wednesday without mentioning countries like India, China and Brazil.
At his first-ever press conference, US Federal Reserve Board chairman Ben Bernanke attributed the recent developments in the Middle East to the significant increase in gas prices in the United States, but also to the increasing demand for oil from emerging markets.
The Fed's interpretation of the increase in gas prices is the economist's basic mantra of supply and demand, he said.
"On the one hand, we have a rapidly growing global economy. Emerging market economies are growing very quickly. And their demand for commodities, including oil, is very, very strong," he said.
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Why global oil demand has surged
Indeed, essentially all of the increase in the demand for oil in the last couple of years, in the last decade, has come from emerging market economies, Bernanke noted.
"In the United States, our demand for oil, our imports have actually been going down over time. So the demand is coming from a growing economy, where we've seen about a 25 per cent increase in emerging market output... since before the crisis," he said.
"And on the supply side, as everybody knows who watches television, we're seeing disruptions in the Middle East, North Africa, in Libya and in other places that have constrained supply; that supply has not been made up; and that, in turn, has driven gas prices up quite significantly," Bernanke said.
"So again, this is a very adverse development. It accounts, in the short run, for the increase in pretty much almost all of the increase in our inflation forecast, at least in the very near term.
There's not much that the Federal Reserve can do about gas prices per se, at least not without derailing growth entirely, which is certainly not the right way to go," the Fed chairman said.
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Why global oil demand has surged
"After all, the Fed can't create more oil. We don't control the growth rates of emerging market economies.
What we can do is basically try to keep higher gas prices from passing into other prices and wages throughout the economy and creating a broader inflation, which would be much more difficult to extinguish," Bernanke said.
"Our view is that gas prices will not continue to rise at the recent pace and as they stabilise or even come down, if the situation stabilises in the Middle East that will provide some relief on the inflation front. But we'll have to watch it very carefully," he said.