Gasoline lines redux? The normally staid Paris-based International Energy Agency (IEA) warns in a new report:
We need action on fuel economy standards as soon as possible.
The Wall Street Journal (subs. req’d) has an article today summarizing the IEA report today:
In a dire forecast, the Paris-based International Energy Agency is warning of an impending crunch in the supply of oil and natural gas needed to power world economic growth in coming years.
The IEA is the energy watchdog of the world’s 26 most-advanced economies, and its pessimistic assessment is contained in its latest annual medium-term forecast to 2012, which was released Monday. The agency expects oil supply to be tighter in coming years than it had previously forecast, with little prospect of relief except a possible easing should world economic growth falter. (See the full text of the report.)
The IEA doesn’t forecast oil prices, though its conclusions imply that consumers should expect continued upward pressure on the cost of energy.
“Oil and gas price pressures look set to remain in the coming years,” the IEA report said. “Slower-than-expected GDP growth may provide a breathing space, but it is abundantly clear that if the path of demand does not change on its own, it may well be driven to change by higher prices.”
On Friday, world crude oil prices moved closer to the record-high settlement of $77.03 chalked up a year ago this month. August delivery crude oil on the Nymex ended at $72.81, up $1.00.
Crude prices are still well below the inflation-adjusted highs reached 27 years ago, however. Based on May consumer-price data in the U.S., a barrel of crude fetched $101.26 in April 1980.
The IEA now forecasts that the Organization of Petroleum Exporting Countries will have precious little spare capacity left to pump extra oil by 2012. It also expects supply increases from non-OPEC oil producers and biofuel producers to start flagging after 2009. Natural-gas markets will also be tight because of inadequate supply increases, limiting the ability of consumers to switch between oil and natural gas. Still, demand for oil and gas is expected to grow at a brisk pace in the years to 2012.
Some of the key projections and observations by the IEA in its latest medium-term review are:
• Global oil demand is projected to expand by 1.9 million barrels a day, or 2.2% a year on average, reaching 95.8 million barrels a day by 2012, up from 86.13 million barrels a day this year. This forecast is based on global economic growth of about 4.5% annually. Oil demand is expected to grow most rapidly in Asia and the Middle East.
• If GDP growth falls to an annual 3.2% in the years to 2012, that would reduce the need for OPEC oil by some two million barrels a day — merely postponing by a year the point at which demand growth surpasses the growth in global oil capacity.
• Total growth in non-OPEC supply is pegged at 2.6 million barrels a day by 2012, to 52.56 million barrels a day from 49.98 million barrels a day in 2007. This growth is slower than the rate posted so far this decade, and about half the rate of projected demand growth.
• OPEC spare capacity, the safety cushion in the world system, is expected to remain constrained until 2010, then shrink to minimal levels by 2012, when the exporters collectively will only be able to pump a paltry extra amount — the equivalent of 1.6% of world demand. While the IEA didn’t say so, the shrinking of OPEC’s spare capacity in the past decade has made the oil market skittish about any development that could conceivably threaten supply, resulting in volatile markets and prices.
• The world’s refinery capacity is likely to increase significantly during the period under review, leaving the world better able to process crude oil into usable products like gasoline.