Agoracom

Institutional skepticism about how long high oil prices can last does not account for the slump in this year?s production. OPEC?s production has fallen this year because of continued disruptions in Nigeria. Rebels in the Niger River Delta have reminded us all of how vulnerable the global energy system is to systematic sabotage. But excluding Nigeria, the rest of OPEC is running at near capacity.

That leaves the last two options. Prices send production signals. Either OPEC and non-OPEC producer are ignoring those signals—or they can’t respond to them in order to boost supply and take advantage of the high prices. And if OPEC is unable to increase supply now, how will it be able do so twenty years from now, when demand is much higher?

This presents global oil users (and producers) with a big problem, a problem that can be seen in the form of a chart which falls into seldom-used research category of “science fiction fantasy.” The chart shows that the IEA expects global production of liquid fuels to reach 117 million barrels of oil and oil equivalent by 2017. That “oil equivalent” includes ‘unconventional hydrocarbons’ like biofuels, oil shale, and tar sands.

If you do the maths, that means global oil production will have to increase by 37%, from 86mbpd today to 117.7mbpd by 2017. If you wish to express it in numbers, that means the world needs another 32mbpd of production—in addition to maintaining current production—to meet the IEA’s projected demand in 2017.