IEA Report

Oil prices always seem a bit of a mystery-even low prices can be a problem.  While some market manipulation goes on (previous post), a New York Times editorial indicates that several commodities are down in price due to slower economic growth.  U.S. consumers benefit now, but another world recession may be coming.

This year's report from the International Energy Association expects oil prices to continue to fall through 2015.  But Nick Cunningham notices that the long-term prospects are not so good. Demand for oil in 2040 is projected to be 104 million barrels per day (up from 90 million now) while oil shale and tar sands production is only expected to last about ten more years.  That puts the burden for increased production back on the Middle East--and Iraq was expected to pick up much of that.

IEA says oil and coal production will plateau by 2040 when energy supply will be roughly equal among low-carbon sources, gas, oil and coal.  Renewable sources are growing rapidly, but it doesn't seem like they could make up for any oil production shortfall.

“A well-supplied oil market in the short-term should not disguise the challenges that lie ahead, as the world is set to rely more heavily on a relatively small number of producing countries,” said IEA Chief Economist Fatih Birol. “The apparent breathing space provided by rising output in the Americas over the next decade provides little reassurance, given the long lead times of new upstream projects.”