IEA Warns Of Oil And Gas Crunch In 5 Years

Monday, July 9th 2007, 11:30 am
By: News On 6

PARIS (AP) _ The International Energy Agency warned Monday of a global oil and gas crunch due to unforeseen demand and inadequate supply from OPEC and other suppliers.

``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 escalating global growth will cause spare capacity from the Organization of Petroleum Exporting Countries to fall to ``uncomfortably low levels'' _ and non-OPEC countries will not pick up the slack. Supply increases from non-OPEC oil producers will begin to recede in 2009, the report says.

Assumptions are based on a 2.2 percent annual increase in global oil demand, powered by economic growth, which the agency forecasts at 4.5 percent per year.

While the agency does not forecast oil prices, the scenario points to higher prices at the gas pump.

``The IEA has a political role as well as an economic role: the defense of the consumer,'' said Theirry Lefrancois, an analyst with Natixis in Paris.

``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.'''

``If demand increases more than 2 percent a year we will have a major petrol crisis,'' he said.

Oil prices reached nearly one-year highs last week, rising 3 percent from the June 29 settlement price of $70.68. That was the front-month contract's first close above $70 since August 2006.

Light, sweet crude for August delivery was down 3 cents to $72.78 a barrel in electronic trading on the New York Mercantile Exchange Monday. The contract Friday gained $1 to settle at $72.81 a barrel _ the front-month contract's highest settlement since Aug. 15, 2006.