Era of cheap oil is over

An interesting article published on FinanceAsia.com today, putting a rather groomy picture of the energy crisis that could dwarf the current economic problems.

Non-traditional projects that were profitable when prices were high, such as Canada's oil sands and fields that are deep underwater, are now being postponed or even scrapped. At the same time, the Organisation of Petroleum Exporting Countries (Opec) cut production targets in December in a desperate bid to reverse the decline. That move seems to have had some effect, but there is now a fear that supply in the oil market will be dangerously out of sync with demand when the economy starts to recover.

At the current rate of decline, says the IEA, 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. New sources will make up some of the difference, but to fully meet future demand, the world's energy companies will need to discover the equivalent of six new Saudi Arabias during the next 20 years. Simply maintaining today's levels means discovering four new Saudi Arabias.