Oil thirst makes Middle East crucial

Oct 27, 2004 02:00 AM

by Carl Mortished and Gary Duncan

Soaring global energy demand will leave the West increasingly in thrall to the Middle East, the world's energy watchdog said. The International Energy Agency (IEA) forecast that the world's daily burn rate for oil will rise by almost half over the next 25 years, to 121 mm bpd, as global energy consumption rises inexorably.
The IEA predicts that demand of energy of all types will soar by 59 % by 2030, leaving developed economies increasingly dependent on OPEC. By 2030 the oil cartel's Middle Eastern members are set to provide half of the world's supplies of crude oil, the IEA said in its annual study of the World Energy Outlook.

Dependency on the Middle East will also heighten risks of supply disruptions from political turmoil or terrorist strikes in the volatile region.
"As international trade (in oil) expands, risks will grow of a supply disruption at the critical chokepoints through which oil must flow," the agency said.
The IEA's warning came as fears over the economic fallout from the present surge in oil prices to record highs were underlined as forecasts for growth in the eurozone next year were cut sharply and confidence among US consumers tumbled.

The European Commission blamed the jump in the cost of crude by more than half this year for a cut in its projections for eurozone growth in 2005 to 2 %, from 2.3 %. In the US, surging fuel costs, as well the bitter presidential election contest and the present economic "soft patch", were blamed for a slump in consumer sentiment to its weakest level for seven months.
Claude Mandil, IEA director, said the present oil market turmoil was a symptom of "considerable malaise in the world of energy". Reliance on fossil fuels would increase rather than diminish over the next two decades -- a dependency on carbon-emitting forms of energy that Mr Mandil described as "deeply troubling".

According to IEA forecasts, 85 % of the increased energy consumption will be met by burning oil, gas or coal. At least two thirds of that extra burn rate will come from developing countries, mainly India and China. Mr Mandil emphasised that the IEA had few anxieties about fossil fuel supplies.
"The earth contains more than enough energy resources to meet demand for many decades to come. The world is not running out of oil yet," he said. The IEA expects the Middle East OPEC states to be pumping 52 mm bpd by 2030, up from 20 mm now.

However, Sadad Husseini, a former vice-president in charge of production at Saudi Arabia's state-owned Aramco oil group, told that hopes of doubling Saudi production to 22 mm bpd over two decades to help to meet demand were "unrealistic" and a dangerous basis for policy.
The struggle to meet higher demand could also be hampered by the need, highlighted by the IEA, to create a total of $ 16 t in new infrastructure to cope with the huge predicted expansion in oil trade.

Confidence among Britain's manufacturers has tumbled to its weakest in more than a year as soaring oil prices addto a squeeze on profits and stoke fears that the sector's recovery could stall. The Confederation of British Industries' latest snapshot found that rising costs, driven by oil and commodity prices, are increasing pressure on companies' margins, while a fall in orders has fuelled anxiety over weak demand.
The CBI called for a freeze on interest rates as its headline gauge of industry confidence slumped to minus 10 in October, down from plus 7 in July to the lowest since July last year. But analysts said the survey may be too gloomy with signs emerging of improved export performance.

Source: Times Online
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