Oil crunch coming?

The International Energy Agency (IEA) last week reported in its annual energy outlook that it cannot rule out a "supply-side crunch" in world oil markets by 2015. IEA projects even faster demand growth than it did last year.

Experts say the recent run-up in oil prices to nearly $100 per barrel is being driven by global demand outpacing supply, rather than the pattern of recent decades where oil producers cut back supply or political unrest pushed up prices. [photo courtesy of Ks Geol. Survey]

Of particular concern to the U.S. is the forecast from Canada's National Energy Board for production from the Alberta tar sands, currently running about 1.3 million b/d, which is starting to slip. The Board now believes that we should expect a daily production of 2.8 million b/d by 2015, down from the 3.0 million b/d that had been forecast.

Citing higher production costs as the reason why it was reducing its forecast, the Energy Board clearly left open the possibility of further cost-related reductions in the years ahead. According to the report, “a number of companies are reassessing the economics of their projects.”