Warnings of an oil supply crunch have been frequent and vocal in recent months. As oil prices fell from their peak in July, so did plans to invest in future oil production – and the world’s oil reserves are becoming increasingly difficult to get at, making investment even more important.
The IEA is joining the fray and has come out with its clearest warning yet that the world is headed for a supply crunch. In a new report, the agency reportedly warned that oil companies and investors have postponed about $170bn of projects, equivalent to about 2m barrels per day, and a further 4.2m in future oil supply capacity has been delayed by at least 18 months.
The view itself is not new and nor are the numbers particularly surprising, given the many reports of investment delays of late. But significantly, the IEA will present the report to the G8 meeting of energy ministers this weekend in Rome.
The Wall Street Journal reports:
“What we’re saying is that come around 2012 the impact of this big recession on oil investment and capacity, if current trends continue, could be severe with much higher oil prices,” said IEA chief economist Fatih Birol.
The report also notes that much of the pullback in investment is occurring in non-Opec countries such as Canada, where oil reserves are more difficult to extract.
Downturn Sets Up Surge in Oil Prices (WSJ, 19/05/09)
The credit crunch hits energy companies’ investment, and the fight against climate change (FT Energy Source, 07/05/09)
Oil producers and consumers fret over future price spikes (FT Energy Source, 27/04/09)