Today's low oil prices the anomaly..
If you are breathing a sigh of relief thinking that the free fall oil prices went into late 2008 and cheaper petrol at the pump are a return to the proper order of things and the end of a painful speculative bubble, don't be deluded, the era of cheap oil is still over: today's low oil prices are more likely only masking temporarily a looming crisis and recent high energy prices may be expected to return with a vengeance.
Unwinding of demand in response to downturn accelerating this trend...
Indeed, if oil supply was not keeping up with demand driving prices up last year, the current collapse in oil prices is only accelerating this trend. As oil producers slash production to try and prop up prices and new and non-traditional (deep sea; oil-sands etc.)projects are scrapped as plummeting oil prices mean they are no longer profitable etc. we are seeing a scaling down of production not unlike the coiling of a spring. The big question is, will supply not be even more out of sync with demand when the global economy starts to recover?
Investment in the alternatives we will need also suffering...
The concerning thing is that it is not just traditional oil, gas and other fossil supply that which is suffering as investment dries up, alternative technologies which are more important now than ever, are also seeing investment dry up as low oil energy prices make technologies that were competitive with oil when oil prices were high, left high and dry now that prices have fallen so much. Only Monday it was reported that "The economics of the world’s biggest offshore wind-farm project are “on a knife-edge”, ...its viability called into question by the falling prices of oil, gas and carbon dioxide emissions permits."
Current global trends unsustainable says IEA.
At the current rate of decline, said the IEA 2008 oil outlook report, oil production from existing fields will fall to just 30 million barrels a day by 2030 – or roughly 73 million barrels short of the expected level of demand. The chances of finding the necessary new demand from somewhere to fill this gap is - besides being horribly undesirable - also highly implausible. The reports executive summary starts "Current global trends in energy supply and consumption are patently unsustainable." And concludes with a similarly potent call to arms: "Time is running out and the time to act is now."
Without drastic measures the market will only force feed us more cruelly the medicine we are rejecting...As this report highlights the era of cheap oil is over and unless drastic measures are taken to reduce energy consumption and speed up the development of new energy sources, the world could be headed for a serious energy crisis as soon as 2015. If this happens, and without wanting to sound melodramatic, our current economic woes will be entirely overshadowed by this crisis. It is important that investment in new and alternative energy is sustained and expanded to ensure we are as prepared as we can be against the comming supply shock.
