According to a report from the Paris-based International Energy Agency (IEA), rising world demand for oil probably cannot be met and, during the next five years, prices will skyrocket. Making its predictions on the medium-term oil market, the IEA concludes that the overall demand for oil will rise by 2.2% per annum between 2007 and 2012 as the world economy grows at somewhere close to 4.5% a year. The estimated thirst for oil is up by 2% on a previous inference, but it means that by 2012 the world will be getting through 95.8 million barrels per day, following a 1.9m barrel daily increase over this same period. As the IEA report noted: “oil looks extremely tight in five years time” and there are “prospects of even tighter natural gas markets at the turn of the decade”.
It is mainly the burgeoning industrialisation and economic expansion in countries in Asia, notably China and India, and in the Middle East where demand for oil is expected to increase in rate by a factor of three in comparison with the 30 industrialised nations that belong to the Organisation for Economic Co-operation and Development. It is thought that industrialised countries will need to rely more and more on the output from OPEC countries in order to slake their thirst for oil, in view of sustained geopolitical tensions involving alternative producers. For example, the report has not included any possible expansion in output from Iran, Iraq or Venezuela nor that the currently closed production of 500,000 daily barrels of Nigerian oil will resurface within the next five years.
Oil prices rose within the last two days to more than $76 a barrel, which has not been reached since last August, in consequence of rising demand and necessary maintenance of the North Sea fields which have prompted anxiety over supplies. A barrel of Brent crude is now worth $76.34, only surpassed by the record of $76.84, 11 months ago. According to analysts, oil prices are likely to stay on the high side, against a backdrop of political tensions of all kinds, recent publicity over kidnappings of westerners in Nigeria and the imminent advance of the hurricane season, which wiped-out significant production last year.
The IEA report said: "Despite four years of high oil prices, this report sees increasing market tightness beyond 2010. It is possible that the supply crunch could be deferred - but not by much. The potential effects of a combination of low OPEC spare capacity and slow non-OPEC production growth are of significant concern - all the more so when considered alongside tightness in other hydrocarbons, particularly the natural gas market."
According to Lawrence Eagles, who is the IEA's head of oil industry and markets division: "The results of our analysis are quite strong. Something needs to happen. Either we need to have more supplies coming on stream, or we need to have lower demand growth." The scenario of providing more global refining capacity during the next 5 years is not sanguine either, as a result of increased costs and a shortage of engineers. Production of "sweet" (low-sulphur) light crude oil peaked in 2005, and what comes out of the ground as "crude" will tend towards a heavier "sour" (more sulphurous) material that is more difficult and hence more expensive to refine. Many engineers too, are discouraged from working in what they perceive as dangerous locations, such as the Middle East and Africa where the possible threat of kidnap or assassination, real or not, must be in the back of their minds.
It is debatable how much unconventional oil e.g. from tar-sands or coal-liquefaction might be produced, and as I have pointed-out before in these postings, the amount of biofuels that can be made without significantly compromising food-production is really quite limited. Current output of biofuels is predicted to amount to 1.75 million barrels a day by 2012, or more than twice the amount marketed last year, but even that optimistic figure still amounts to just 2% of global fuel supplies, and further expansion of the sector is likely to be held-back on grounds of economy.
The fact is that peak-oil is at hand - predicted to come in about 5 years - and we are unlikely to be able to match the gargantuan quantities of cheap oil that the modern "global village" depends upon. The solution then is simple and yet tough. If we cannot meet demand it is mandatory to adopt a lifestyle that uses less oil, and that particularly means a severe cut in our dependency on transportation. It seems insane or even criminal to simply burn a one-off precious resource like petroleum, which we need not just as a fuel-source but to make every pharmaceutical, plastic material, synthetic fibre and so on, and even food-production has become reliant on oil. When it is in short supply or costing $200 or who knows how much per barrel, how will we survive, if we have not implanted an alternative strategy within which to maintain the integrity of civilization? That alternative must involve a relocalisation of society into a network of smaller communities which is far more self-sustaining at a local level and depends far less on goods imported from elsewhere.
"Energy watchdog warns of supply crunch within five years," by James Moore: http://news.independent.co.uk/business/news/article2750517.ece