The renowned Dutch Clingendael International Energy Programme foresees more future turbulence in the oil markets, an energy crunch by 2010 and potential oil rationing in the Western world.
Here are some of the most interesting conclusions of the highly recommended “Oil Turbulence in the next decade” essay:
- The “oil crunch” predicted by the International Energy Agency could come five years earlier than predicted (thus by 2010 instead of 2015) “and could shake the very foundation of our energy systems”.
- High oil prices are driven by supply and demand imbalances (with a structural ‘floor price’ of $110 a barrel) and it is “reasonable to expect much higher oil prices based on the still worsening supply and demand imbalances”.
- Oil demand is much less responsive to higher prices than in the past.
- The production outlook for 2030 will be at maximum 100-105 million barrels a day (Clingendael seems to have seen a preview of the upcoming World Energy Outlook 2008 by the IEA, which is expected to “correct” its predictions from 116 million in WEO 2007). This will lead to a big lack of supply growth versus demand and a “quickening of … oil field decline rates… could make this pessimistic supply outlook even worse”.
- On the basis of this pessimistic estimate, Clingendael predicts that “demand rationing will be required in the OECD countries and particularly in the US [good luck, President Obama! – WDB], in order to accommodate growth in the newly developing countries, notably China and India”.
- New developing countries will have “to work away their oil product subsidies without triggering a jump in consumer price inflation”.
- The alternative is “fierce competition for scarce oil supplies at much higher price levels, with the risk of triggering a deep and prolonged recession and possible geopolitical tensions”.
- OPEC, Russia and Mexico need to invest in additional production capacity but, at the same time the oil-consuming countries should provide “security of demand” [the report remains rather vague on this – should the West be slowing down its transition to the post-oil society? ].
- Geopolitical tensions over oil supplies will continue to grow.