High oil prices are hurting consumers and could also have adverse implications for producers, the executive director of the International Energy Agency (IEA) said on Tuesday.
Fuel import costs have been pushed up further by a slide in emerging market currencies against the dollar, denting growth and even triggering protests and government fuel price controls in India.
"Many countries' current account deficits have been affected by high oil prices," IEA chief Fatih Birol said at an energy conference in Singapore.
"There are two downward pressures on global oil demand growth. One is high oil prices, and in many countries they're directly related to consumer prices. The second one is global economic growth momentum slowing down."
The effect of high oil prices will be compounded in Southeast Asia as demand is rising fast but production is falling, resulting in the region becoming a net importer of oil, gas and coal, Birol said.
Despite the possibility of a slowdown, Birol said the general outlook for fuel consumption was for continued growth.
While the rise of electric vehicles is expected to result in peak demand for products like diesel and gasoline within coming years, a consumption boom in products such as plastic as well as fuel demand growth from aviation have triggered large-scale refinery investment into petrochemical products and high quality products like jet fuel.
"Global oil Demand will continue to grow even amid the rise of electric vehicles as they are governed by petrochemicals, aviation, among others," he said.
More so than oil, Birol said demand for liquefied natural gas (LNG) would boom.
The IEA chief said that global LNG trade could pass 500 billion cubic metres per day (bcm) by 2023, growing by a third in the coming five years.
LNG demand is primarily driven by growth in China, where an anti-pollution programme is driving a massive shift from coal to natural gas.
But demand is also expected to grow fast in Southeast Asia, where Birol said the power sector needed $50 billion of investment by 2040, more than twice the current level, to keep up with consumption.
Despite this growth potential, the LNG sector faces increasing competition from renewables and storage technology, which are cleaner than fossil fuels and becoming much cheaper.
In many countries, Birol said solar power was on track to become the cheapest source of new electricity.