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Oil and gas shortages likely within 5 years: report

Last Updated: Monday, July 9, 2007 | 2:13 PM ET

Consumers will see the beginnings of a serious global oil and gas shortage within two years, the International Energy Agency (IEA) warned Monday.

The IEA predicts a combination of increasing world demand and inadequate supply from Organization of Petroleum Exporting Countries (OPEC) nations will lead to a global oil and gas crunch by 2012, but also says the signs will become obvious by 2009.

"Not only does oil look extremely tight in five years time, but this coincides with the prospect of even tighter natural gas markets at the turn of the decade," the energy security watchdog for the 26-nation Organization for Economic Cooperation and Development said in an oil market report.

The Paris-based agency forecasts spare capacity (unused pumping capacity than can be immediately opened and sustained in a crisis) will plummet to "uncomfortably low levels," owing to increasing world population growth. Further compounding the problem, the IEA predicts other oil-producing nations will not cover the OPEC shortfalls.

While the agency does not forecast oil prices, the end result is clear: even higher prices at the pump.


A warning to OPEC

However, this oil shortfall may not be inevitable. One analyst says the IEA's ominous prediction is meant to warn OPEC nations, not panic consumers.

"The IEA has a political role as well as an economic role: the defense of the consumer," Thierry Lefrançois, an analyst with French bank Natixis told the Associated Press. "They are saying to OPEC countries, 'Look at where petrol consumption is going to be in 2012, so you will have to increase your production capacities faster than you planned.' "

However, Lefrançois says the IEA's warning should not be taken lightly. He finds the agency's predictions very plausible.

"If demand increases more than two percent a year we will have a major petrol crisis," he said.

Oil prices reached nearly one-year highs last week, rising three per cent from the June 29 settlement price of $70.68.


With files from the Associated Press