World oil production fell by 0.2 % in 2007, the first decline since 2002, while consumption rose by 1.1 %, reports said on the day before, highlighting a tight supply/demand balance that has helped push oil prices to record levels.

Production fell by 130,000 barrels per day (bpd) last year to 81.53 million bpd and reserves were essentially flat at 1.24 trillion barrels, London-based BP said in its 2008 Statistical Review of World Energy.

The figures compiled by BP underline the world?s challenge of boosting production to meet growing demand, particularly from developing economies such as China and India.

Oil prices have been rising since 2002, the steepest and longest rise since BP?s records began in 1861. The increase in prices, which reached a record last week of $139.12 a barrel, partly reflects supply constraints when demand from emerging markets is growing strongly.?The reality is it?s about fundamentals,? said Tony Hayward, BP?s chief executive, at the launch of the review.

He said a weak US dollar and so-called speculators had been blamed for contributing to oil?s rise, but it was more about a tight balance between supply and demand. ?We are not running out of hydrocarbons, but bringing them into production is a different matter,? he said, pointing to political factors, such as resource nationalism, trade barriers and high taxes. ?When it comes to producing more oil, the problems are above ground not below ground and human not geological,? Hayward said.

Countries such as Venezuela and Russia are grabbing more cash and control from firms that work their oil and gas fields.

At the same time, some of the world?s largest reserves, such as those of Saudi Arabia, are off-limits to foreign investment. Sanctions and wars have slowed development of Iraq?s oil industry.

Weak supply

World production fell, in part, because of supply restraint by the Organization of the Petroleum Exporting Countries (OPEC), source of about two in every five barrels of oil.

Supply outside OPEC stayed weak, rising by just over 200,000 bpd in 2007, while output in member-countries of the Organization for Economic Co-operation and Development fell for a fifth straight year, BP added.