I’m not real good at mathematics, but this supply and demand equation doesn’t look good:
“The IEA [International Energy Agency] predicted demand would rise by an average 2.2% a year between 2007 and 2012, up from previous estimates of 2%.”
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“At the same time it predicted production from oil cartel Opec would fall, slipping by 2m bpd in 2009, while it also cut supply forecasts for non-Opec countries by 800,000 bpd.”
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High energy prices ???
You can currently read the entire report here (.pdf). From the Executive Summary:
Despite four years of high oil prices, this report sees increasing market tightness beyond 2010, with OPEC spare capacity declining to minimal levels by 2012. A stronger demand outlook, together with project slippage and geopolitical problems has led to downward revisions of OPEC spare capacity by 2 mb/d in 2009. Despite an increase in biofuels production and a bunching of supply projects over the next few years, OPEC spare capacity is expected to remain relatively constrained before 2009 when slowing upstream capacity growth and accelerating non-OECD demand once more pull it down to uncomfortably low levels.
I think it’s safe to assume that in forecasting, the IEA is going to err on the side of a rosy projection. It wouldn’t be prudent for the organization to generate economic panic. So if the IEA is warning about “uncomfortably low” excess capacity, I worry that it could be even worse, with consumers soon facing an uncomfortable financial situation due to fuel costs.