Current economy could cause surge in future oil prices
An International Energy Agency (IEA) report says the current drop in energy investment because of the economic slowdown could cause a severe increase in oil prices within three years, according to The Wall Street Journal. The report emphasizes the increasing risk that crude oil supply could tighten quickly once the world economy recovers.
In recent months, oil companies and investors have cancelled or postponed about $170 billion of energy investment equivalent to roughly 2 million barrels per day in future oil supply. An additional 4.2 million barrels per day in future oil supply has been delayed by at least 18 months.
"What we're saying is that come around 2012, the effects of this big recession on oil investment and capacity, if current trends continue, could be severe with much higher oil prices," says IEA Chief Economist Fatih Birol.
The IEA estimates oil demand will drop 3 percent to about 83 million barrels per day this year, which is the sharpest drop in about 30 years. Many analysts say oil prices during the next few years could exceed $100 per barrel because of relatively quick energy consumption growth in markets like China, as well as the fact that much of the world's easy-to-tap oil already has been discovered.
However, oil demand recovery still is difficult to predict. Several governments in developed countries are moving forward with energy efficiency, which could ease oil price increases as oil demand recovers.
5/21/2009
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