IMF managing director Rodrigo Rato said in New Delhi on Sunday that the world would have to live with expensive oil for at least the next two years as strong demand and supply constraints combined to strain global oil supplies.
"We have to be aware that probably oil prices will stay high, although probably not at this level, in the next two years at least because of demand pressures - there is certainly very strong demand in the world for oil - and also because of certain supply constraints," Rato told reporters in the Indian capital.
The world economy enjoyed its strongest growth in 30 years during 2004, despite the spike in oil prices, and Rato said he expected over 4% growth again this year.
But he cautioned that global growth could plateau if oil prices stayed at current levels or climbed even higher for longer.
The major responsibility for curtailing oil prices lay with the major oil-consuming nations, according to Rato.
Although supply bottlenecks were forcing prices higher, decades of low margins caused by overcapacity had made major oil companies reluctant to invest in new refineries in the US and Western Europe, he said.
"It’s clear that at this level of prices - even if they’re reduced a little bit in the medium term - governments of all consuming countries have to have a very clear energy policy both in terms of demand and pricing," said Rato, who is on the last leg of a five-day trip to China and India.