The industrialized world's energy watchdog added to rising concerns in some quarters that oil and natural gas production won't keep up with the world's growing thirst for energy in coming years, highlighting worries over supplies and prices.
The Paris-based International Energy Agency, which monitors energy markets on behalf of the world's 26 most-advanced economies, yesterday released its annual medium-term forecast, projecting conditions through 2012. The agency expects oil supply to be tighter in coming years than it had forecast, with little prospect of relief unless world economic growth falters.
The IEA doesn't forecast oil prices, but 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 [gross-domestic-product] growth may provide a breathing space, but it is abundantly clear that if the path of demand doesn't change on its own, it may well be driven to change by higher prices," the report said.
August-delivery crude oil on the New York Mercantile Exchange fell 62 cents to settle at $72.19. That is close to the $77.03 nominal high reached nearly a year ago but still well below the inflation-adjusted highs reached 27 years ago. Based on May consumer-price data in the U.S., a barrel of crude fetched $101.26 in April 1980 when adjusted for inflation.
The IEA forecasts that the Organization of Petroleum Exporting Countries, the cartel that supplies more than 40% of the world's daily oil needs, will have little spare capacity left by 2012. It also expects supply increases from non-OPEC oil producers and biofuel producers to start flagging after 2009. Natural-gas markets also will 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 rise at a brisk pace in the years to 2012.
Critics of the IEA point to the number of revisions it makes in its data and some notable misses, like a surge in demand from China three years ago that helped send oil prices surging. Still, the IEA is one of the consistent sources of data on oil supply and demand and is widely respected in the industry.
It said global oil demand is projected to expand 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 increase most rapidly in Asia and the Middle East.
Should economic growth slow in terms of gross domestic product to an annual 3.2% in the years to 2012, the need for OPEC oil would be reduced by some two million barrels a day. But that would merely postpone by a year the point at which demand surpasses the growth in global oil capacity.
It pegged total growth in non-OPEC supply 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 is slower than the rate posted so far this decade and about half the rate of projected growth in demand.
It said OPEC's 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 be able to pump only 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.
On the positive side, the IEA said the world's refinery capacity is likely to increase significantly during the period.
The Paris-based International Energy Agency, which monitors energy markets on behalf of the world's 26 most-advanced economies, yesterday released its annual medium-term forecast, projecting conditions through 2012. The agency expects oil supply to be tighter in coming years than it had forecast, with little prospect of relief unless world economic growth falters.
The IEA doesn't forecast oil prices, but its conclusions imply that consumers should expect continued upward pressure on the cost of energy.
IEA Forecast Underlines Oil, Gas Supply Worries
"Oil and gas price pressures look set to remain in the coming years," the IEA report said. "Slower-than-expected [gross-domestic-product] growth may provide a breathing space, but it is abundantly clear that if the path of demand doesn't change on its own, it may well be driven to change by higher prices," the report said.
August-delivery crude oil on the New York Mercantile Exchange fell 62 cents to settle at $72.19. That is close to the $77.03 nominal high reached nearly a year ago but still well below the inflation-adjusted highs reached 27 years ago. Based on May consumer-price data in the U.S., a barrel of crude fetched $101.26 in April 1980 when adjusted for inflation.
The IEA forecasts that the Organization of Petroleum Exporting Countries, the cartel that supplies more than 40% of the world's daily oil needs, will have little spare capacity left by 2012. It also expects supply increases from non-OPEC oil producers and biofuel producers to start flagging after 2009. Natural-gas markets also will 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 rise at a brisk pace in the years to 2012.
Critics of the IEA point to the number of revisions it makes in its data and some notable misses, like a surge in demand from China three years ago that helped send oil prices surging. Still, the IEA is one of the consistent sources of data on oil supply and demand and is widely respected in the industry.
It said global oil demand is projected to expand 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 increase most rapidly in Asia and the Middle East.Should economic growth slow in terms of gross domestic product to an annual 3.2% in the years to 2012, the need for OPEC oil would be reduced by some two million barrels a day. But that would merely postpone by a year the point at which demand surpasses the growth in global oil capacity.
It pegged total growth in non-OPEC supply 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 is slower than the rate posted so far this decade and about half the rate of projected growth in demand.It said OPEC's 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 be able to pump only 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.
On the positive side, the IEA said the world's refinery capacity is likely to increase significantly during the period.
Via: The Wall Street Journal
by BHUSHAN BAHREE
