IEA worried over oil supply

May 22, 2008 11:01:48 AM PDT
A leading global energy monitor said Thursday it is worried that demand for oil will outstrip world supply and is preparing a landmark revision of its closely watched forecasts. The International Energy Agency is studying depletion rates at about 400 oil fields in its first-ever study of world oil supply, said chief economist Fatih Birol.

"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 its new forecasts are likely to further upset markets. Oil prices hit an all-time high Thursday above $135 a barrel before falling back.

Birol said the study, which 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."

He would not speculate on whether the forecast, which will predict supplies through 2030, could go sharply downward.

Birol said oil companies and governments have been cooperative with the IEA experts preparing the report, though analysts were skeptical that the agency would get a complete picture from often-secretive oil producing nations.

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 United States 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.

Gasoline prices sprinted to a new record high overnight ahead of the Memorial Day weekend. The national average rose above $3.83 a gallon. Some analysts predict gas will break past $4 as early as next week.

Oil prices rose to a record $135.09 a barrel in overnight electronic trading on the New York Mercantile Exchange before retreating to trade down $1.11 at $132.06 a barrel by afternoon in New York.

Unlike last year, oil prices are setting new record highs on a daily basis, pushing gas prices with them.

The fear is that oil producing regions will not be able to meet future demand.

"The oil investments required may be much, much higher than what people assume," Birol told The Wall Street Journal in a story published Thursday. "This is a dangerous situation."