A recent study from the U.S. National Petroleum Council (NPC), led by former ExxonMobil chairman Lee Raymond, asserts global energy consumption will increase as much as 60 percent by 2030 but assures “the world is not running out of energy resources.” The report says the world is entering an era of tight energy supplies where global oil production could drop to 5 percent below current output by 2030. The Financial Times says the NPC study represents “a defining moment in the history of the global energy industry” crystallizing the “unease about global energy supplies that has been accumulating over the past couple of years.”
The Petroleum Council recommends strengthening U.S. fuel economy standards, further developing biofuels, and increasing domestic drilling for oil and gas. It also calls on the United States to take up policies to curb greenhouse gas emissions, similar to recommendations made by a recent CFR Task Force on U.S. oil dependency. Such recommendations may be surprising coming from Raymond, well known for his skepticism about global warming, and the New York Times says they “probably far exceed” what the Bush administration was expecting when the U.S. Energy Department requested the study in 2005.
But the NPC study fed a new round of debate among energy experts about the availability of supplies. The Association for the Study of Peak Oil and Gas, a nonpartisan research organization studying global oil and gas depletion, says the NPC report “artfully camouflages the enormous near-term challenges in producing sufficient oil and gas to fuel the global economy” and contradicts a recent report from the International Energy Agency (IEA) indicating an oil supply “crunch” as early as 2012. Clif Droke, a commodities analyst, dismisses the IEA forecast. He instead maintains that “every major spike in a commodity price throughout history has sparked the same kind of talk,” which always ends with “a sudden (and quite unexpected) outpouring of supply onto the market that seemingly comes out of nowhere.” Growing demand for oil is already causing increased investment in existing oil fields and a push to exploit untapped reserves (ISN).
The sharp reality is that oil prices continue to rise and the conventional wisdom says the trend is unlikely to abate (Forbes) anytime soon. Some analysts forecast oil could reach one hundred dollars a barrel (Economic Times) within the year. A recent report from Britain’s Center for Global Energy Studies says that current prices are being driven by a shortage of supply rather than the strength of demand.
Several governments, including the United States, have called on the Organization of Petroleum-Exporting Countries (OPEC) to ratchet up production to help lower prices. But OPEC Minister Ali al-Naimi—who blames the problem of skyrocketing prices on refining bottlenecks and “geopolitical concerns”—maintains current oil supplies are sufficient. OPEC’s own report on the oil outlook for 2030 notes that oil demand and economic growth have proved more “resilient than previously thought” (PDF). The Economist argues that it is not in OPEC’s “collective interest to derail economic growth or destroy demand for their wares.” This CFR.org Backgrounder examines OPEC’s ability to influence global oil prices.