The International Energy Agency (IEA) was established in the wake of the 1973-74 oil crisis to ensure the uninterupted supply of oil to industrialized nations. This autonomous agency now predicts oil prices will rise an additional 30% over the next three years.
The goal of the IEA organization is to monitor oil production and the international market for oil and other energy sectors. The IEA is a multi-government and independent monitoring agency based in Paris. Five years ago IEA stated that oil production will rise to 120 million barrels a day by the year 2030. Now the IEA is predicting the price of oil will increase by 30% over the following three years.
IEA chief economist Dr. Fatih Birol says the world’s crude oil production peaked back in 2006 and the price of oil will continue to rise. “The existing fields are declining so sharply that in order to stay where we are in terms of production levels in the next 25 years, we have to find and develop four new Saudi Arabias,” he said. For reference, Saudi Arabia has claimed (as it has for the past 25 years) to be sitting on 267 billion barrels of oil.
Dr. Birol is quick to point out that oil reserves are out there. Yet, the ability to access some of these oil reserves is not. Compounding this issue is the fact that from a business standpoint it is not in the best interest of oil producers to flood the market with their product. There is also the rising tide of demand from China for oil, and India is gaining ground as well. More demand plus less supply will lead to higher prices.
In the short term the price if oil is dropping; the June crude contract on the New York Mercantile Exchange dropped $2.61 to $106.63 a barrel down from a 2½-year high that was above $114 just last week. In comparison at the height of the global financial crisis in 2008 oil prices were at $148 a barrel.
Time will tell if the IEA’s prediction about oil prices will come to pass, though this quick reversal of attitudes is sure to raise a few eyebrows. When the oil does run out, our global economy needs to be ready. The way to prepare is for nations to transition to alternative fuel sources sooner rather than later. Dr. Birol sees potential in liquid natural gases, and while that might be an option for some, there are a wide variety of potential solutions that need to be vetted for different circumstances and geographic locations. A larger, global, effort needs to be made to seek out alternative fuels that will work in all of the world’s unique environments and civilizations.
Source: ABC News
Andrew Meggison was born in the state of Maine and educated in Massachusetts. Andrew earned a Bachelor’s Degree in Government and International Relations from Clark University and a Master’s Degree in Political Science from Northeastern University. Being an Eagle Scout, Andrew has a passion for all things environmental. In his free time Andrew enjoys writing, exploring the great outdoors, a good film, and a creative cocktail.