Oil prices to rise to $150 a barrel according to IEA

Oil prices are expected to hit $150 a barrel if investment in oil economies in the Middle East and North Africa does not rise with demand, according to the International Energy Agency (IEA).

Unrest in Libya and the rest of the Middle East have kept prices high during 2011 and without a more rapid development of renewable technologies the IEA say the world is heading down an ‘insecure, inefficient and high carbon’ path. The IEA’s World Energy Outlook, published annually, says that as we further delay clean energy investment there is a ‘lock-in’ of high carbon infrastructure making it more and more difficult to attain the climate goals and energy security needs of the 21^st century.

Effectively, with diminishing availability of easy to access oil, output will decline whilst demand increases rapidly, especially in emerging markets such as China. There is the prospect of further oil production in the Gulf of Mexico and Alaska, which Barack Obama approved on Tuesday and gas stability in the short term due to production from shale; in the long term this will not be enough to compensate for rapid increases in demand.

Many environmentalists are calling for subsidies on fossil fuels to be reduced or removed completely which would lead to a massive increase in the financial competitiveness of renewables. With current financial conditions however, any policy change that is seen to have a short term negative impact on business is disregarded.