Risk of future oil spike increasing
Despite the recent plunge in oil prices (60% off the high of $147 in July), the International Energy Agency (IEA) predicts that prices will rebound to an average of $100 per barrel between 2008 and 2015.
The IEA predicts that because of drastic declines in short-term investments in oil production due to credit and market conditions, the threat of a future supply crunch is growing.
A decrease in supply, as older fields dry up and newer fields are not brought online, coupled with continued growth from India and China, may create the conditions for another spike in prices. The IEA predicts that global oil consumption will grow, on average, by 1% per year through 2030. If the supply is not increased, or the demand lowered, a new price spike is likely.
Of course, the best solution to this problem is to address the demand side. If we can take that projected 1% yearly growth number, and turn it into a 1% yearly contraction, that would represent fundamental change.
US crude closed on Friday up 27 cents to $61.04, down nearly 10% for the week.
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