IEA inquiry into whether oil supplies will run dry by 2012

The International Energy Agency has ordered an inquiry into whether the world could run out of oil in four years’ time, it was reported yesterday.

The IEA has concerns about what might happen in 2012, when demand for oil, boosted by the rapid growth of the Chinese and Indian economies, is expected to have reached 95 million barrels a day. Global supply at that point is projected at only 96 million barrels a day. Such a thin margin would be vulnerable to any sudden supply crisis in volatile countries such as Nigeria, Venezuela or Iraq, now estimated to have overtaken Saudi Arabia as the biggest oil nation.

The IEA said its inquiries would form part of short and long-term forecasts to be published in July and again in November. Its energy research chief, Lawrence Eagles, said: “Up to now we have believed that supply can cope with demand. One caveat is that we don’t know for certain whether estimates of reserves in countries such as Saudi Arabia are entirely accurate.”

John Waterlow, analyst at oil research consultancy Wood Mackenzie, commented: “Many oil-producing countries are closed, secretive societies where it can be difficult to pinpoint the level of provable reserves.”

The IEA’s inquiry follows last week’s new record high for black gold at $135 a barrel, fuelling inflation and possible world recession.

Although some analysts blame commodity speculators for the recent spike in prices, others point to surging international demand from Asia and South America. IEA researchers have warned that even if there is enough oil under the ground, supply difficulties could emerge because national oil companies and Western multinationals have failed to invest sufficiently in equipment and pipelines.

Meanwhile, 10 US airlines have been forced to close down since Christmas, according to the US Air Transport Association, which said it was “all to do with the cost of jet fuel”. On Friday, shares in UK business airline Silverjet were suspended on the Alternative Investment Market after the airline admitted it was unable to secure funding to carry on doing business. Fuel costs for a single transatlantic trip on a Silverjet B767 are estimated to have jumped from £28,600 a year ago to £44,000 now.

Andrew Fitchie, analyst at Collins Stewart, said: “The no-frills airlines are in the eye of the storm. They will have to slash capacity, stay on the tarmac or look at merging.”

SIMON BAIN
May 26 2008

Source: The Herald

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