The International Energy Agency, the developed countries' watchdog, yesterday said that oil prices by 2030 would be 50 per cent higher than today if Saudi Arabia did not muster the political will to invest billions of dollars in new production.
Oil prices hovered above a three-month low after US data showed an increase in crude stocks, while warm weather sapped demand for winter fuels. US light crude oil was at $59.50 a barrel, recovering from an intraday low of $59.05 hit on Tuesday, the weakest level since late July. Brent crude was 27 cents lower at $58.10 a barrel.
Data from the US government's Energy Information Administration showed crude stocks had risen by 2.7 million barrels to 319.1 million in the week ending October 28, compared with analysts' forecasts for a two-million barrel rise.
Fatih Birol, the IEA's chief economist, said Saudi Arabia, the most important oil producer, might not make the investment needed to ensure production met the strong demand growth in China and India.
"It is not a problem of availability of reserves or capital. We need to be sure that the increase in production will be high enough and a sustained production capacity increase policy is in place. That will need sustained political will," he said.
Saudi Arabia has plans to invest $14 billion to raise output capacity from 11 million barrels a day to 12.5m barrels per day (b/d) by 2009, according to a report by Samba Financial Group, a Riyadh-based bank.
The IEA said Saudi Arabia would need almost to double current output of 10 million b/d to meet the expectations of demand in 2030.
But Mr Birol said the kingdom might muster the long-term political will only to produce just over half the extra barrels deemed necessary.
Iran and Iraq are also vital to ensuring adequate oil and natural gas supplies in the next 25 years. But both face political hurdles to achieving the necessary investment. Many Middle East countries fear that investing heavily in new oil supplies will deplete fields too quickly and cut revenues by depressing oil prices.
Mr Birol said: "We may end up with much less oil from the Middle East than we demand. There is substantial risk of substantially high oil prices if current investment in the Middle East is not stepped up substantially. Such high oil prices would be an additional trigger for major consuming nations to introduce policies to save oil and look for alternative sources."
The agency's price forecast, which is often conservative, forms the benchmark for many other forecasts, including those made by central banks, oil companies and big oil producers.
The agency's near-term forecasts are below crude oil's current price range of about $60 a barrel because the IEA, which releases its World Energy Outlook next week, expects new supplies of oil and investment in platforms, pipelines and refineries to ease the current crunch.
