The International Energy Agency has issued a report that says oil demand will accelerate into 2008 while supply will not. Demand in China and other emerging markets will put a great deal of pressure on pricing. The agency indicated that if OPEC does not increase output near the end of 2007, oil supply could become extremely tight.
At almost the same time, the US oil industry is issuing a report entitled "Facing the Hard Truths About Energy." This report also points to demand in developing countries as the primary driver of rising oil prices. Figures collected for the document also suggest that need for new supply could rise almost 50% by 2030.
Although the case could be made that higher oil prices will mitigate demand, that would appear to be unlikely. Large markets, especially China, cannot keep GDP rising at recent rates without access to energy, and it may be that the government is willing to provide capital to make certain that there is no drop in oil supply for the country.
Consumers in the US are not likely to be as fortunate. Businesses and auto owners would feel the full force of rising oil prices, and the problem could cause long term problems without easy solution for large industries from airlines to automotive, shipping.
It is an ugly picture of the future that appears to get more likely with each passing year.
Douglas A. McIntyre
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