However, large government subsidies in high growth economies such as India and China are continuing to fuel high demand for oil. Statistics bear testimony. China's demand rose by an estimated 7.8 per cent year-on-year in February 2008.
Similarly, in India, oil product sales, a proxy for demand, soared by 10.9 per cent year-on-year in February 2008, which is the highest pace since November 2006. Funding this growth is the oil subsidy, which is estimated to cross Rs 2,00,000 crore (Rs 2,000 billion) in financial year 2009.
Falling global oil supply. According to International Energy Agency, which acts as the energy policy advisor to 27 member countries, global oil supply is estimated to have fallen by 100 kb/d (thousand barrels per day) in March 2008 compared to February 2008.
This has been primarily due to lower output from oil sources in the North Sea, Africa and Russia. This is despite the fact that global supply increased in excess of 1 mb/d (million barrels per day) both in the fourth quarter of 2007 and the first quarter of 2008.
The falling supply is exerting an upward pressure on prices.
Image: Security personnel stand guard at the entrance of Hindustan Petroleum plant on the outskirts of New Delhi | Photograph: Prakash Singh/AFP/Getty Images
Also read: How India can end the looming food crisis
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