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Lower Oil Prices--but For How Long?

In case anyone's wondering whether we can all hop back in our Range Rovers and party had now that oil prices have collapsed (it's at $64/barrel and falling), here comes the IEA with a little forecast:

Oil prices will rebound to more than $100 a barrel as soon as the world economy recovers, and will exceed $200 by 2030, the International Energy Agency will say in its flagship report to be published next week.

“While market imbalances could temporarily cause prices to fall back, it is becoming increasingly apparent that the era of cheap oil is over,” the report states.

The developed world’s energy watchdog has doubled its long-term price expectation from last year’s $108 a barrel for 2030 and assumes oil prices will rebound from today’s $60-$70 a barrel to trade, in real terms adjusted by inflation, at an average of more than $100 a barrel from 2008 to 2015.

The IEA’s World Energy Outlook has come to this conclusion largely because it believes companies will struggle to pump enough new oil to offset the steep production declines of the world’s older fields.

Hmm, Oil futures seem to be humming the same tune—the spread between, say, 2008 prices and 2013 prices is growing fast. If that's true—and, yes, there are other estimates out there, plenty of uncertainty, etc.—then it sounds like a stellar idea for us to spend the intervening years becoming less reliant on oil, so that when the price jets back up to $100/barrel and beyond, we're not all buckling at the knees again.

--Bradford Plumer