More oil news...

Further to yesterday's post about peak oil, the International Energy Agency is very concerned about what will happen as the price rises:

Recovery in the world's biggest economies could be jeopardized if crude oil prices stay over $80 (U.S.) per barrel, the International Energy Agency said Tuesday.

The IEA also reported that OPEC posted the first “significant drop” in output in March in more than a year – falling 190,000 barrels per day to 29 million barrels a day – largely due to a near 10-per cent drop in Iraqi output.

The agency, the energy arm of the Organization for Economic Cooperation and Development, a grouping of the world's richest nations, said concerns remain that global oil markets are “overheated,” with crude around $85 per barrel.

“Ultimately, things might turn messy for producers if $80-100 (per barrel) is merely seen as the new $60-80 (per barrel), stunting economic recovery while prompting resurgent non-oil and non-OPEC supply investment,” the Paris-based IEA said in its monthly oil market report.

From the Globe. The use of the word "overheated" is interesting, as it would seem to suggest that the current oil prices don't reflect fundamentals. But if peak oil is as close as yesterday's post suggests, oil might well be undervalued. Also interesting is the comment about "resurgent non-oil and non-OPEC supply investment"; they seem to think this is a bad thing. Admittedly, some of it is (given that it could include stuff like the tar sands, coal liquefaction, etc) but this could also include proper investment in better alternatives. I have my doubts that the IEA wants this, though. Indeed, they've been accused of distorting their numbers to avoid rocking the boat, presumably because it might lead to investment in alternatives before the established energy companies can corner the market.