The International Energy Agency has warned in its global energy outlook that falling oil prices will lead to supply shocks in the future which in turn will give rise to higher prices. This statement, however, failed to have an effect on global oil markets as prices continued to plummet closing at $56.16 US a barrel in New York on Wednesday when this statement was made.
Despite this dismal trend of falling prices, Paris based IEA warned that the current supply and consumption trend was quite unstable and that pretty soon prices would surge back up to more than $200 US a barrel without efforts being made to identify new oil reserves.
The IEA report suggests that a $26 trillion development package is needed to develop new energy sources. However, deteriorating economic conditions may delay these investments.
Existing oil fields are getting depleted at a very fast rate adding to the instability of the world's energy situation. More than half of the world's energy comes from oil fields almost half a century old.
Nobuo Tanaka, the group's executive director gave a simple analogy to illustrate how growing oil demands could not be supported by existing resources. He said that even if oil demand was to remain flat, roughly four times the current capacity of Saudi Arabian fields would need to be built by 2030 just to offset the effect of oilfield decline.
This does not imply that the world will run out of resources. The IEA estimates that there are around 1.3 trillion barrels of proven reserves enough to keep the planet going for 40 years at current consumption rates. However there's no guarantee that people who own those resources would be willing to exploit them quickly.
To read the complete article by Shaun Polczer on the Calgary Herald website click here.
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