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NEW YORK -- A transfer of wealth of historic proportions is taking place as worldwide spending on oil is expected to grow this year by about $295 billion, or 27 percent, compared with 2003, according to government data. Consumers and businesses are paying substantially more for gasoline, heating oil, diesel and other products derived from crude as demand and prices surge, reported the Associated Press.
While the corresponding windfall of profits for oil-exporting nations and petroleum companies is sapping strength from the international economic recovery, it's not causing the kind of financial shock that followed the oil crises of the 1970s.
Still, experts warn that the market constraints underlying high and volatile energy prices suggest that higher oil prices could be here to stay. "There's not a consensus out there, but the question is being asked more now than it has been at any time in the last 20 years," said Jim Burkhard, director of global oil at Cambridge Energy Research Associates in Cambridge, Mass.
Rising oil costs are linked as much to America's apparent drive-at-any-price car culture and China's raging industrial expansion as they are to the world's unusually thin supply cushion, a condition that has magnified anxieties about potential supply disruptions in Venezuela, Russia and Nigeria.
Consumption continues to rise in spite of higher prices that are expected to slow global economic growth by about 0.5 percent in 2005. Much sharper financial pain will be felt in poor, developing countries that are net oil importers.
"As with most things, the global impact is not spread evenly around the world," said Jeffrey D. Lewis, manager of international finance research at The World Bank. Lewis predicted that, without emergency funding, much of the organization's $2.5 billion aid to struggling nations this year will have to be reallocated to fuel purchases by local governments, leaving health and education programs grossly under-funded or scrapped altogether.
The extra $295 billion spent on oil this year comes courtesy of, but not without complaint from, motorists, homeowners, manufacturers, airlines and truckers. The biggest share would come from Americans, who account for nearly one quarter of global daily oil demand.
U.S. consumers are expected to shell out an additional $40 billion this year just to heat their homes and fuel their cars and trucks. The greatest financial squeeze is felt by low- and fixed-income families, who spend about three times as much of their wealth on energy as do middle-income families.
In China, where daily oil imports have risen an estimated 35 percent, or roughly 700,000 barrels a day, and have helped propel global demand and prices to unexpectedly high levels, the rising cost of fuel is merely contributing to a minor slowdown of the country's economic boom. Put another way, mammoth industrial growth is dwarfing any negative impact caused by higher energy prices.