World will face oil crunch ‘in five years’

The world is facing an oil supply “crunch” within five years that will force up prices to record levels and increase the west’s dependence on oil cartel Opec, the industrialised countries’ energy watchdog has warned. In its starkest warning yet on the world’s fuel outlook, the International Energy Agency said “oil looks extremely tight in five years time” and there are “prospects of even tighter natural gas markets at the turn of the decade”. The IEA said that supply was falling faster than expected in mature areas, such as the North Sea or Mexico, while projects in new provinces such as the Russian Far East, faced long delays. Meanwhile consumption is accelerating on strong economic growth in emerging countries. The problem is exacerbated by the fact that supply from non-members of the Organisation of the Petroleum Exporting Countries will increase at an annual pace of 1 per cent, or less than half the rate of the demand rise. The widening gap between rising consumption and lagging non-Opec supply will force Opec to sharply increase its production in the next five years. Lawrence Eagles, head of the IEA’s oil market division, told the Financial Times: “If we get to the point were there is insufficient supply, the only way to balance the market will be through higher prices and a drop in demand.” Oil demand will grow at an annual rate of 2.2 per cent during the next five years, up from a previous estimate of 2 per cent, to reach 95.8m barrels a day in 2012. China, the Middle East and other emerging countries will lead the increase.