THE AGE of cheap oil is now over – and that’s official.
For the first time, the International Energy Agency has conceded that global crude oil production has already peaked and that the commodity will become more and more expensive.
In the Catalyst programme broadcast last night on Australia’s ABC1 television, the agency’s chief economist, Fatih Birol, said “peak oil” was reached in 2006.
He said that he expected oil prices to rise by 30 per cent over the next three years.
“The existing [oil] fields are declining so sharply that in order to stay where we are in terms of production levels in the next 25 years, we have to find and develop four new Saudi Arabias,” Dr Birol said.
“It is a huge, huge challenge that we continue to underline.”
Only five years ago, the agency – an independent, inter-governmental agency formed in the wake of the 1973 oil crisis – was confidently forecasting that crude oil production would increase to 120 million barrels a day by 2030.
Dr Birol said one of the conclusions the agency had come to was that the age of cheap oil was over.
Yesterday, light crude was trading at $113 per barrel and forecast to rise to $130 per barrel.
At the height of the global financial crisis in 2008, oil spiked to $148 per barrel.
Global instability in oil-rich regions meant that crude oil would only get more expensive, according to Dr Birol.
“The amount of increase in the oil input bill in Europe is equal to the government budget deficit of Greece plus Portugal put together,” he said.
“If it increases further . . . we believe it will increase at least 20, 30 per cent higher in the next few years to come and this would mean additional pressure on the financing of many governments who are the oil importers.”
More expensive oil will make it more difficult for countries to break out of recession.
Dr Birol said more oil reserves “might be there”, but access was not.
There was also market manipulation.
“For some producers, it is better that oil doesn’t come to market so they would like to see perhaps higher prices as a result of tightness in the markets,” he said.
