The International Energy Agency warned Friday that high oil, gas, and coal prices mean “expensive energy is back,” threatening economic growth, especially in developing countries.
"Our position is that expensive energy is back, with oil, gas and coal trading at multi-year highs, and it poses a threat to economic growth," IEA said in its monthly oil market report.
Oil prices are at their highest level since 2014, recently breaching $85 a barrel, but fell slightly this week.
The higher prices are discouraging consumers, forcing the IEA to lower its demand forecast. It says demand growth will slow by 110,000 barrels per day to 1.3 million barrels per day in 2018 and 1.4 million barrels per day in 2019.
IEA also blames Trump’s trade dispute with China for threatening economic growth, and oil demand.
“The global economy is also at risk from trade disputes,” the IEA said.
Prices are rising because exports from Iran, OPEC’s third largest producer, are falling ahead of sanctions President Trump will impose beginning Nov. 4. The Trump administration says it will penalize countries that buy oil from Iran, cutting them off from the American financial system, as a way to cripple the country’s economy after the president pulled the U.S. from the nuclear deal with Tehran.
Iran’s exports have already fallen by 800,000 barrels per days since May, the IEA said.
“With Iran's exports likely to fall by significantly more... and the ever-present threat of supply disruptions in Libya and a collapse in Venezuela, we cannot be complacent and the market is clearly signaling its concerns that more supply might be needed,” IEA said.
But other OPEC producers led by Saudi Arabia are producing more to pick up the slack. OPEC crude oil production rose by 100,000 barrels per day in September to the highest level in a year.
However, these production increases are “straining” the world’s spare capacity, surplus oil production that can be brought online within 90 days.
“This strain could be with us for some time and it will likely be accompanied by higher prices, however much we regret them and their potential negative impact on the global economy,” IEA said.