Oil prices might be down a lot, but they will rise again soon, the supply problem is far more structural and worse than the much more temporal demand ‘problem’..
World Soon Out of Oil, Maybe
By: Greg Brown
- Don’t dump those alternative energy stocks quite yet.
- A leaked early draft of a report by the International Energy Agency (IEA) suggests that the output decline is now 9.1 percent a year, faster than previously thought.
- Lacking new investment, supply from existing oil fields will fall far short of demand, reported the Financial Times, based on the draft report.
- As the oil price has cratered, of course, many new publicly financed oil projects are now on ice, and private financing is even harder to find in the midst of a banking crisis.
- Hardest hit is Canada, where oil shale projects quickly become uneconomical once crude drops below $90 a barrel. Billions in projects there have been shelved or are under review.
- According to the draft report, the IEA nevertheless says that the investment level needed to keep up will equal $360 billion a year every year until 2030.
- The agency is miffed that the report, which it called “an early version of a draft from several months ago that was subsequently revised and updated,” got into the hands of the U.K. financial daily.
- “The numbers in the article can be misleading and should not be quoted or considered to be official IEA results,” said the agency in a statement, without detailing how wrong or which numbers.
- The official World Energy Outlook from the agency is due out Nov. 12.
It’s difficult to see how a revised version can substantially alter this picture though, without losing credibility.