New Delhi: Contrary to expectations, global oil prices, which have touched a 21-year high, are unlikely to fall substantially even if oil producing cartel OPEC (Organisation of Petroleum Exporting Countries) raises production, industry officials said today (June 3, 2004).

If that happens, it would be bad news for oil guzzling India, which spent $ 18.2 billion, equivalent to 3 per cent of its GDP (Gross Domestic Product), on oil imports in 2003-04.

"Against global oil consumption of 80 million barrels per day (BPD), OPEC countries produce just 25 million BPD. The remaining 55 million BPD is produced by non-OPEC countries and I don't see OPEC decision to raise output influencing the prices substantially," Subir Raha, chairman of Oil and Natural Gas Corp, India's most valuable company by market capitalisation, said.

The spike in prices to record highs of over $ 42 a barrel were primarily driven by terrorist attacks on oil producing city of Al-Khobar in Saudi Arabia, in which 22 people were killed.

With further attacks expected in Saudi Arabia and no signs of stability returning to Iraq, analysts expect the "war premium" on oil to remain.

"The premium for terrorism and instability is about seven to eight Dollars. When this goes, the market will go down," a leading Mumbai-based oil analyst said.

"OPEC can ask members to produce more but that's not going to soften prices," said P Sugavanam, finance director at Indian Oil Corp, the nation's biggest oil refiner. "You may see an immediate drop, though prices will come back up again, but I don't see any respite," he said.