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Subsidies may be distorting the true price of oil in the United States, and the price of crude continues to rise unchecked but that won't slow global demand for oil over the next few years—even if demand in the developing world is contracting—according to the International Energy Agency.
The Paris-based organization predicts that demand is expected to grow by 1.6% per year between 2008 and 2013, while non-Opec supply will increase at only 0.5% per year. This increased reliance on Opec means that oil prices are likely to remain at record levels.
Structural Growth in the Developing World & Supply Constraints
The Financial Times quotes from the IEA's Medium Term Oil Market Report: "Structural demand growth in developing countries and ongoing supply constraints continue to paint a tight market picture over the medium-term."
The FT again:
The IEA said that despite billions of dollars of investment, the challenge of pumping ever more oil out of their aging fields is proving so great that non-Opec countries will in the next five years have to rely on biofuels, such as corn-based ethanol, for 50 per cent of their growth in overall fuels.
The fast decline of fields — especially in the North Sea and Mexico where production is shrinking by more than 20 per cent each year — means that 14.8m of the 16m barrels of new supply from non-Opec countries over the next five years will go to making up for losses from old fields producing less and less each year.
No simplistic explanations for high prices
There's much more parsing of the report in the original article , but let me leave you with some words of wisdom from the IEA:
"Like alchemists looking for a way to turn basic elements into gold, everyone wants a simplistic explanation for high prices...Often it is a case of political expediency to find a scapegoat for higher prices rather than undertake serious analysis of perhaps difficult decisions."
via :: The Financial Times (you may have to register to read this article)