Posted by: Tony Carson | 7 November, 2007

Oil Prices may be a drop in the bucket

“I am sorry to say this, but we are headed toward really bad days,” International Energy Agency chief economist Fatih Birol declared this week. “Lots of targets have been set but very little has been done. There is a lot of talk and no action.”

And we are very sorry to hear it.  Here is the problem, according to this Time article Oil Prices: It Gets Worse:

The reason for the IEA’s alarm is its expectation that economic development will raise global energy demands by about 50% in a generation, from today’s 85 million barrels a day to about 116 million barrels a day in 2030.

Nearly half that increase in demand will come from just two countries — China and India, which are electrifying hundreds of cities and putting millions of new cars on their roads, most driven by people who once walked, or rode bicycles and buses. By 2030, those two countries will be responsible for two-thirds of the world’s carbon gas emissions, which are the primary human activity causing global warming.

The bad news is not only environmental. As the world scrambles to boost energy supplies over the next two decades, an ever-greater percentage of its supplies of oil and gas will come from a dwindling number of countries, largely arrayed around the Persian Gulf, as the massive North Sea and Gulf of Mexico deposits are finally exhausted. That will leave the industrialized countries far more dependent on the volatile Middle East in 2030 than they are today, and the likes of Saudi Arabia, Kuwait and Iran will dictate terms to companies like ExxonMobil and Chevron, which increasingly operate as contractors to state-run oil companies in many producer nations.

Forecasting prices, however, has become an increasingly inexact science for analysts, as prices in recent months have galloped ahead of their worst predictions. Says Oswald Clint, a London-based analyst for Sanford Bernstein: “A year ago, our predictions for November 2007 were about $50 to $62 dollars a barrel” — at least $35 short of Tuesday’s price.

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