Oil demand higher than supply within five years

Oil refinery Pictures, Images and Photos
The International Energy Agency reported Thursday that global demand for oil and gas will be higher than the supply by 2016. Emerging markets in Asia, led by China are the main reason for the long expected demand increase. This does not mean that supplies of the energy sources will not grow as well. In fact, countries like Canada, United States, Brazil and some OPEC members will see supply increases. The increases will especially be in natural gas as new technologies and reserves have been found throughout the U.S., Canada and other places.

If governments do nothing new between now and 2016, the prices for these commodities will surely be even higher than they are today. It is simple economics. If there is a higher demand than supply the price goes up until some demand goes down.  The entire world will be affected by such price increases and they could threaten global economic growth. Figuring out a global strategy is virtually impossible because many countries have competing agendas. Therefore, I will focus on North America.

The U.S. needs to ramp up oil drilling both onshore and offshore. The Obama administration must not be so against this idea. Of course, they need to ensure standards are high and that they are well enforced to avoid another oil spill, but the domestic supply must increase as much as possible. They also need to be less harsh towards Canada’s tar sands. Sure, it is worse for the environment than conventional oil reserves but, as a medium term solution to avoid serious economic problems it is a necessary evil.

Finally, they should invest money in science and technology specifically related to alternative energy. They already do some of this, but much more is needed. China is already considered a leader in this category, ahead of the U.S. Under no circumstances should this be the case. In the long run these investments will make North America the dominant and stable economic power it is today, in the future. It is on the U.S. government to act first and act boldly.