The International Energy Agency recently issued a warning proclaiming that the era of cheap oil is over. It further went ahead to predict that crude oil prices would soon rebound to above $100 a barrel and double again by 2030 as fields in the North Sea and elsewhere in the world declined faster than expected.
More than $26 trillion of new investment would be needed over the next 20 years to ensure the world had enough energy, according to the IEA, which was founded during the oil crisis of 1973-74 and acts as energy policy adviser to 28 member countries including Britain.
The organization further said that while market imbalances could temporarily cause prices to fall back, it is becoming increasingly apparent that the era of cheap oil is over.
The developed world's energy watchdog has doubled up its long-term price expectation from last year's $108 a barrel for 2030. It assumes oil prices will rebound from today's $60-$70 a barrel to trade, in real terms adjusted by inflation, at an average of more than $100 from 2008 to 2015.
The summary to the IEA's annual World Energy Outlook says the rise in oil prices is for the most part because companies will battle to pump enough new oil to offset the production declines of the world's older fields. However, the organization refuses to accept that what is known as "peak oil" has yet been reached.
"The world is not running short of oil or gas just yet," it said. "The immediate risk to supply is not one of a lack of global resources, but rather a lack of investment where it is needed."
Total world oil output is not anticipated to peak before 2030, but the more easily approachable sources of crude, or conventional oil, are expected to plateau towards the end of that period. That will make the world more dependent on non-conventional sources, such as oil sands, which are hard to process, while conventional oil production will rise by only 5m barrels a day by 2030, the IEA forecasts.
The IEA has consistently said that energy resources have become concentrated in fewer hands as any increase in production is largely confined to Organization of Petroleum-Exporting Countries, the producers' cartel. Non-OPEC conventional oil output has already reached a plateau and is projected to be in fall by around the middle of the next decade.
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