IEA sees oil supply crunch after 2010
By MarketWatch
Last Update: 11:54 PM ET Jul 9, 2007
SAN FRANCISCO (MarketWatch) -- Crude-oil supplies will be tighter in coming years, with a "supply crunch" after 2010 as OPEC's spare production capacity evaporates, the International Energy Agency predicted Monday.
Supplies will tighten because economic growth will drive up demand and offset significant increases in oil-refining capacity, the IEA said, according to media reports citing the agency's annual medium-term forecast.
The IEA, which monitors energy markets for the world's 26 most-advanced economies, doesn't forecast oil prices, but its conclusions imply consumers should expect continued upward pressure on energy costs, The Wall Street Journal reported in its online edition, See Wall Street Journal story (subscription required).
"Oil and gas price pressures look set to remain in the coming years," the IEA reported, according to the Journal. "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 comes as crude oil for August delivery settled Monday at $72.19 a barrel on the New York Mercantile Exchange. See futures movers
That price 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, according to the Journal. Based on May consumer-price data in the U.S., a barrel of crude fetched $101.26 in April 1980 when adjusted for inflation, according to the report.
According to the IEA report cited by the Journal:
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. The 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.
The Organization of Petroleum Exporting Countries, which supplies more than 40% of the world's daily oil needs, will have little spare capacity left by 2012.
Increases from non-OPEC oil producers and biofuel producers should 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.
Should GDP growth slow an annual 3.2% in the years to 2012, the need for OPEC oil would be reduced by some 2 million barrels a day, but that would merely postpone by a year the point at which demand surpasses the growth in global oil capacity, according to the report.
The IEA 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 about half the rate of projected growth in demand, according to the report.
The IEA also 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, according to the Journal.
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.
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