Alarm bells sounded again

The International Energy Agency (IEA) is forecasting world oil demand will set a new record next year when is smashes through 2008’s pre-recession high – and warned that the “era of cheap oil is over.”

According to the IEA’s latest Oil Market Report, published August 11, global demand will reach 86.6 million barrels per day in 2010, and then 87.9 million barrels per day in 2011, assuming a continuing global economic recovery. This means demand is set to pass the all-time high of 86.9 million barrels per day established in 2008 before the global economic downturn.

Opec's spare capacity, was as low as 2 million barrels a day in July 2008 when price peaked. Opec claims to have a 6.6 mb capacity but IEA warns this could fall to around 3 mb a day by 2015. No wonder IEA's Fatih Birol said recently again, “The era of cheap oil is over. Each barrel oil that will come to market in the future will be much more difficult to produce and therefore more expensive. We all - governments, industry and consumers - should carefully choose the type of car we want to buy in the future and should be prepared for oil prices being much higher than several years ago.”

The market power of a few Mid east iol producing nations will increase largely and economy of oil buying nations will be affected. As Birol has said, even if demand remained steady, the world would have to find the equivalent of four Saudi Arabias to maintain production, and six Saudi Arabias if it is to keep up with the expected increase in demand between now and 2030.

As Opec becomes the sole operator, its spare capacity will play a big role and if as IEA says, that is going to decrease, well then... economic chaos will start building up.

Better that nations start decreasing reliance on oil. Easier said than done but, tough times demand tough decisions, right?