Oil Wars: Analysts foresee 'new world energy order'
Pastor Dale Morgan
Oil Wars: Analysts foresee 'new world energy order'*
* Story Highlights
* Paris-based IEA fears there may not be enough oil to slake the
world's thirst
* IEA is studying depletion rates at about 400 oil fields through to
2030
* Oil demand expected to shift more to China, India and the Middle East
* IEA's forecasts likely to further upset markets, with oil prices
already at record high
PARIS, France (AP) -- A leading global energy monitor fears there may
not be enough oil out there to slake the world's thirst -- and is
preparing a landmark forecast that could reverberate through the global
economy even as major companies announce fuel-related cutbacks.
The IEA study was prompted by concern about volatile world oil markets
and uncertainty about supplies.
The International Energy Agency is studying depletion rates at about 400
oil fields in a first-of-its-kind study of world oil supply, chief
economist Fatih Birol said.
"We are entering a new world energy order, " Birol told The Associated
Press.
Market analysts call the Paris-based IEA the world's most reliable
independent source of oil information and welcomed its decision to
undertake a deep study of oil supplies.
But the IEA's new forecasts are likely to further upset markets. Oil
prices hit an all-time high Thursday above $135 a barrel before falling
back. Video Watch an economist's forecast for oil prices »
Less oil would mean even higher prices for everything from gasoline to
food. Already, airlines squeezed by jet fuel costs are bleeding profits
and predicting cutbacks and industry upheaval. Ford Motor said Thursday
it was cutting production of gas-guzzling sport utility vehicles and
forecast more rough times ahead.
Birol said the IEA study, whose results will be released in November,
was prompted by concern about the volatility of world oil markets and
uncertainty about supply levels.
"The prices are very high, and demand did not respond in the last few
years as much as one would have expected," Birol said. "The growth in
terms of production was not great. We did not see enough investment."
The spurt in oil prices Thursday came after a report in the Wall Street
Journal that the IEA was planning to lower its forecast for long-term
world supply.
Birol would not speculate on whether the forecast, which will predict
supplies through 2030, could go sharply downward. "We will see," he said.
The IEA's past forecasts put oil supply at about 116 million barrels a
day in 2030, up from 87 million barrels a day now.
"Although the agency's official assessment isn't expected until later
this year, the market's interpretation is that global supply may be
significantly tighter than previously projected by the major oil market
monitors," said Jim Ritterbusch, president of energy trading advisory
service Ritterbusch and Associates in Galena, Illinois.
Birol said oil companies and governments have been cooperative with the
IEA experts preparing the report, but added, "It is not an easy task. It
is the first time this is being done in the public domain on such a scale."
Simon Wardell, oil analyst at Global Insight in London, was skeptical
that the IEA would get a complete picture from "countries that are very
closely guarded" such as Saudi Arabia, the No. 1 producer.
That is important because Birol said one of the key shifts coming up is
that the world will become increasingly reliant on national oil
companies instead of multinational ones.
"Up to now, we have seen that the international oil companies were
responsible for bringing a big chunk of the oil to the markets. Now, in
many cases, since existing reserves are declining, a big part of oil
will need to come from national oil companies. And they have their own
conditions, their own context."
Birol called for greater investment everywhere.
Wardell said the IEA report would have limited effect on investment.
"It's not like oil companies aren't already looking around," he said.
But he said governments could take notice and "start thinking of
policies that would ensure more oil."
Birol noted that, "Both on the demand side and supply side, we have new
actors who change the rules of the game."
He said most demand now and in the coming decades will come from China,
India and the Middle East. That is a stark shift from past decades, when
the U.S. and Europe were demand-drivers.
The IEA is part of the Organization for Economic Cooperation and
Development, which brings together 30 rich nations. It has no links to
OPEC, and its review may challenge the Organization for Petroleum
Exporting Countries' view that the world is well-supplied with oil.
Birol said the report is looking at onshore and offshore supplies --
including hard-to-reach wells in the deep sea.
He noted that Brazilian state oil company Petroleo Brasileiro SA said
Thursday it has struck more oil in waters near the huge offshore Tupi
field -- but remained cautious about how much "good oil" such fields
would produce.
Fears about fuel prices helped send shares in Europe's largest airline,
Air France-KLM, down 9 percent Thursday after it announced a quarterly
net loss and said it expects the coming year to be "challenging."
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CEO Jean-Cyril Spinetta said the soaring cost of fuel means the industry
is in for a "profound transformation," predicting capacity reductions,
the acceleration of mergers and the exit of some players from the market.
Ford Motor said Thursday it is cutting North American production of
pickups and SUVs as car buyers eyeing record gas prices turn toward more
fuel-efficient models. The automaker says it no longer expects to return
to profitability by 2009 and didn't rule out layoffs and plant closures.