What the reports do not explore very closely, however, is the extent to which CERA is still at the optimistic end of the range of forecasts.
The study takes forward the “recession shock” report that CERA did for the British government ahead of the oil producers and consumers meeting in London last December. Unlike some forecasters, who predict output, CERA looks at productive capacity: the amount that the world’s oil fields could produce if they were all working at full stretch. So it includes, for example, capacity in Opec countries left idle to comply with production restraints. On the basis, CERA expects productive capacity to rise from about 94.5m barrels per day now (compared to actual output of about 85.5m b/d), to 101.4m b/d by 2014.
As the stories pointed out, that is a steep reduction of 7.6m b/d from the previous CERA forecast of 109m b/d, made last summer. Project delays and cancellations caused by the world recession, the financial crisis and the oil price slump, which have been warned of by many companies are governments, are blamed for the revision.
That estimate of the loss of future supply capacity seems entirely reasonable, given the severity of the crisis. It is worth remembering, however, that CERA is far from being the most pessimistic forecaster around.
If, as we all hope, the world economy is back on an even keel again by 2014, then unused oil capacity would presumably be lower than the present 9m b/d, on CERA’s calculations. So if we assume it is about 7m b/d, that would give output of about 94m-95m b/d on that capacity of 101.4m.
But the IEA was already forecasting in November in its World Energy Outlook that output would be in the mid-90s in the middle years of the next decade. Since that forecast, it has made it clear that it is likely to cut its projections in its next Medium-Term Oil Outlook, due in the summer.
And meanwhile we have Christophe de Margerie, CEO of Total, warning that he does not believe the world will ever produce more than 89m b/d.
CERA’s warning that the “aftershock” from the present downturn could include a supply crunch in teh next decade certainly looks well-founded. But it could be even worse than CERA suggests.
UPDATE Peter Jackson at CERA suggests a number in the “low 90s” is likely, depending on “the timing and scale of the recovery, the impact of the increase in economic activity on the rate of oil demand increase, where OPEC is headed and just how much capacity expansion is stalled by the current oil price situation.”
That still puts CERA ahead of the most pessmistic forecasts.