Credit Crisis Intensifies Risk of Oil Shortage

The credit crisis increases the danger that global oil reserves will not be exploited quickly enough due to insufficient investment in capacity expansion to meet rising demand in the coming years, the International Energy Agency (IEA) stated on Wednesday.

In its World Energy Outlook for 2008, the IEA emphasizes that the world does not face a resource shortage, but points to barriers in accessing new oil fields, which include the strengthening dominance of national oil companies and decreasing availability of loans. Many investments are being delayed due to the credit crisis and its effects on global economic growth and energy demand.

"By 2015, we need about 30 million barrels of new capacity per day," the IEA stated. "There is a real danger that insufficient investment during this period will lead to an oil supply crisis." The IEA estimates that over the next 20 years, more than $26 trillion in investment will be needed globally to ensure adequate energy supply, an increase of over $4 trillion compared to the agency’s forecasts from 2007. Investment in oil exploration and production has nominally increased, but much of that increase is related to high costs and the fact that cheaper reserves have been unavailable to international oil companies.

"Today, capital is mostly going into research and development of expensive reserves, partly due to the limited access of international oil companies to the cheapest resources." The gap between the development of new capacity and actual needs to keep pace with demand after 2010 will widen significantly, the IEA further warns.

IEA projections indicate that global oil supply will rise to 106 million barrels per day by 2030, up from 84 million barrels per day in 2007. A significant portion of that increase will be attributed to members of the Organization of the Petroleum Exporting Countries (OPEC), whose share of global production is expected to rise to 51 percent in 2030, up from 44 percent in 2007. Outside of OPEC, production has already peaked in most countries, and in most of the remaining ones, it will peak before 2030, the IEA notes.

The IEA’s projections for global oil demand indicate an increase of an average of one percent per year, reaching 106 million barrels per day by 2030, up from 85 million in 2007. Global demand for energy is also expected to grow by an average of 1.6 percent per year. More than half of that increase will be attributed to China, the second-largest energy consumer in the world, along with India. (H)