The International Energy Agency, the OECD organization in Paris that has the job of tracking trends and spotting major emergent issues, will report next week that oil prices will quickly rebound to $100/barrel and higher when the world recession recedes and that theyâ''ll be $200/b and up by 2030. So reports todayâ''s Financial Times, having obtained an advance copy of the executive summary. According to the FT, though prices may stay low for a time, â''it is becoming increasingly apparent that the era of cheap oil is over.â''
From now to 2030, says the IEA, there will be transfer of $2 trillion from the oil consuming nations to OPEC (and that calculation does not appear to include non-OPEC suppliers, notably Russia). This means the consuming nations will be expending 5-7 percent of their GDP on oil, compared to 4 percent in 2007.
One caveat: the IEA warns that â''current global trends in energy supply and consumption are patently unsustainable.â'' People seem to forget when they use the word unsustainable what it means: that the trends cannot be sustained. In other words, ultimately the IEA is saying that what it is predicting to happen will not actually happen because it cannot happen.
So all the specifics in next weekâ''s report have to be taken with a big IFâ''that is to say, roughly speaking, the IEA is saying this is what would happen (eg. 7 percent of GDP spent on oil in 2030) if all the things that we cannot anticipate happening in response to higher prices did not happen although they actually will happen, because otherwise economic life would be unsustainable.
A followup to this blog will guide readers to the full IEA report, as soon as itâ''s posted next week.