Energy prices may soon rise, but not for anything to do with Peak Oil—the theory that production will soon reach a peak and begin to fall—the International Energy Agency (IEA) predicts in its Oil Market Report released last Friday.
Overall supply has actually grown to record highs of over 100 million barrels a day thanks to a mix of factors such as the American shale boom and more production in Libya and Nigeria.
Several other factors suggest that prices should fall: The EIA is revising its forecast demand growth for 2018 and 2019 downward by 100,000 barrels a day from its previous report. And stored oil grew by about 500,000 barrels a day in the second quarter of 2018—a growth the IEA estimates has continued in the third quarter—suggesting that supply is still somewhat ahead of demand.
But choke points in the global market—such as lagging infrastructure for exporting North America’s shale-derived natural gas, currency fluctuations, U.S. sanctions on Iran, and trade squabbles—threaten to make energy costlier.
While the Indian government has said it will not respect the Iran sanctions and China may only comply partway, Iran’s drop in production since the U.S. announced the sanctions (which take effect Nov. 4) has been huge: some 800,000 barrels a day. And Venezuela, in the midst of massive inflation and political instability, is producing less and less oil.
And so, despite record production, prices for Brent crude oil remain over $80 a barrel. The EIA writes, “our position is that expensive energy is back, with oil, gas and coal trading at multi-year highs, and it poses a threat to economic growth.”