IEA Exec says oil supply crunch looms

Some 37.5 million barrels a day of additional oil-production capacity is needed by 2015, but only 25 million barrels a day are planned, International Energy Agency Chief Economist Fatih Birol said. To narrow the gap, major oil producers, especially OPEC members, must ramp up production, Birol said, while major oil consumers, including the US, must make policy changes to ease demand.

While those changes are possible, there are “no major reasons to be optimistic,” Birol said at an event hosted by the Council on Foreign Relations. Birol said he is worried that oil-producing nations will allow parochial political interests to get in the way of global economic interests. Key oil producers in the Middle East, Venezuela and elsewhere have the reserves and the financial means to close the expected supply gap, but "the role of the market will be less and less relevant in these decisions,” Birol said, imploring the providers not to use those assets for political leverage.

Venezuelan President Hugo Chavez has threatened to cut off oil exports to the US if Washington interferes in his nation's political processes. The US is the No. 1 buyer of Venezuelan oil.

To maintain growth in production capacity, the oil industry needs to invest about $5.4 trillion between now and 2030, the Paris-based agency said last month in its 2007 World Energy Outlook. But top global energy consumers, especially the US, China and India, also need to do their part by implementing policies aimed at easing demand, Birol said.

If those two things do not happen, oil prices will remain near historic highs and that is not good for anyone, including the producers, he said. The average price of crude oil averaged $66 in 2006, and is expected to rise to $72 this year and reach $85 a barrel in 2008, the US Energy Information Administration said Tuesday.

Light, sweet crude for January delivery added 81 cents to $88.67 a barrel in midday trading on the New York Mercantile Exchange. That's down more than $10 a barrel from the all-time high of $99.29 set last month, but still well above the year-ago price of roughly $61 a barrel. China and India, with their rapidly advancing economies, now drive global energy demand, and China will surpass the U.S. as the world's top energy consumer in 2010. “We are on the eve of a new world energy order,” Birol said.

China and India also must ramp up efforts to reduce greenhouse gas emissions, the IEA said in its report last month. The two countries will account for about 45 percent of the increase in global demand through 2030, when the world's energy needs are expected to be more than 50 percent higher than current levels. (Houston Chronicle)