PARIS (AFP) - The price of oil is at historic records even allowing for inflation, but the overall burden on the global economy is much less than in the 1980s, the IEA said on Tuesday. This is because annual output by the world economy has grown far faster than the price of oil in the last 25 years, even though the leap in oil prices has outstripped growth of production in the last decade. "Oil prices have reached record highs, both in nominal and real terms," the International Energy Agency said in its monthly report. In May the benchmark price averaged about 125 dollars per barrel, "roughly 23 dollars per barrel more than the previous inflation-adjusted peak observed in April 1980." In Europe, although the price rise had been "tempered" by the rise of European currencies against the dollar "prices have also reached record highs." But, the IEA asked "how expensive has oil really become?" The global amounts spent on oil as a share of global gross domestic product, a way of measuring the cost of importing oil, "remain lower than in the 1980s." This "so-called oil burden stood at around 4.2 percent in 2007, compared with over 7.3 percent in 1980. "It may sharply increase to as much as 6.0 percent in 2008, assuming prices remain at current levels for the rest of the year and based upon the IMF's most recent economic forecasts, but it would still be lower than in 1980." The IEA explained that the oil burden was lower than in the 1980s because "real global GDP grew at a faster pace than real oil prices during most of the 1980s and 1990s." Income gains more than offset price variations. "Since the late 1990s, however, the opposite has occurred: real oil prices have risen much more rapidly than global economic activity." Another ratio was oil intensity, or the amount of oil needed to produce a unit of GDP. This had halved from about 1.3 barrels per day per one million dollars of output, on a 2007 basis, in the early 1970s to less than 0.6 barrels per day now "as the global economy became more oil-efficient." But the improvement had been most marked in industrialised countries in the Organisation for Economic Cooperation and Development. Most non-OECD countries, notably in the Middle East, had a much higher oil intensity ratio. This was partly because many of these countries were reaching, or had reached, a stage at which they attracted heavy industry and demand for oil accelerated relative to per capita GDP. But although the global economy appeared to be less vulenarble than in the recent past to oil dependency, even with oil prices at record levels, "to conclude that the current oil price rally is harmless would be misleading," the IEA said. "The price surge "will arguably have damaging and long-lasting economic consequences." In the OECD, high oil prices were fuelling inflation just as the US economy was caught in housing and credit turmoil. This created serious distortions in advanced economies and complicated the task of central banks: the US Federal Reserve had cut interest rates to ward of a sharp slowdown, but the European Central Bank had kept rates high to fight inflation. The result had been "a dramatic exchange rate movement" and the fall of the dollar had contibuted to US inflation. The rise of the euro could choke growth in Europe. In most non-OECD countries "high oil prices are becoming unbearable and are also fuelling inflation." Those that exported high-priced commodities, or with rising currencies such as some African countries with currencies linked to the euro, had been able to cushion the effect of high oil prices. But most, and the poorest, would suffer "a dramatic effect upon income and development levels." Countries that subsidised fuel prices were having to make big adjustments as these subsidies "become unaffordable, with all the economic, political and social consequences that this entails."