iea predicts oil price to rebound to $100

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    By Javier Blas and Carola Hoyos in London

    Published: November 5 2008 19:01 | Last updated: November 5 2008 22:26

    Oil prices will rebound to more than $100 a barrel as soon as the world economy recovers, and will exceed $200 by 2030, the International Energy Agency will say in its flagship report to be published next week.

    While market imbalances could temporarily cause prices to fall back, it is becoming increasingly apparent that the era of cheap oil is over,” the report states.

    The developed world’s energy watchdog has doubled its long-term price expectation from last year’s $108 a barrel for 2030 and assumes oil prices will rebound from today’s $60-$70 a barrel to trade, in real terms adjusted by inflation, at an average of more than $100 a barrel from 2008 to 2015.

    The IEA’s World Energy Outlook has come to this conclusion largely because it believes companies will struggle to pump enough new oil to offset the steep production declines of the world’s older fields.

    “Current global trends in energy supply and consumption are patently unsustainable,” the report states.

    In its WEO report, an executive summary of which has been obtained by the Financial Times, the IEA estimates that by 2010 oil companies will have to commit to projects producing almost as much oil as Saudi Arabia – or about 7m barrels a day – if the world is to avoid a supply crunch by the middle of the next decade.

    The IEA refused to comment.

    The stark assessment comes as companies cancel projects from Kazakhstan to Canada because the collapse in oil prices makes them uneconomical.

    The industry will have to invest $350bn each year until 2030 to counter the steep rates of decline of existing fields and find enough extra oil to satisfy the growing demand of countries such as China, the report states.

    Output from the world’s oil fields is declining at a natural rate of 9 per cent, the IEA found, following the most comprehensive review of its kind. This decline rate is curtailed to 6.7 per cent when current investments to boost production are made. However, even with such investments, the decline rate worsens significantly to 8.6 per cent by 2030.

    The declining rates are steeper than the industry had previously assumed. They are also slightly steeper than an earlier draft of the report because the IEA has expanded the study to 800 oil fields, adding 250 smaller fields.

 
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