Oil prices plunged on Wednesday as investors grappled with the prospect that global growth next year will slow more than originally feared, cutting demand for gasoline and other crude products. Expectations that a snapshot of the US inventories will also show reduced consumption of oil and derivatives also acted as a drag on the market. Oil prices sank under $53 a barrel here on Wednesday, hitting the lowest level since January 2007, as traders worried about weaker demand for energy amid a gloomy economic outlook. In afternoon London trade, Brent North Sea crude for delivery in December plunged to $52.88 a barrel, a level last seen on January 22, 2007. New York's main contract, light sweet crude for December, dropped to $56.41 oil newa barrel, which was last witnessed on March 20, 2007. The steep price declines of the past half year may be temporary. The International Energy Agency - the energy monitor for the world's industrialized nations - has nearly doubled its forecast for the price of oil over the next 20 years, because of rising demand in the developing world as well as surging costs of production as oil needs to be sourced from more expensive offshore fields and state-run companies. In its World Energy Outlook Wednesday, it hiked its forecast for the price of a barrel of oil in 2030 to just over $200 in nominal terms, compared to its forecast last year of $108 a barrel. Measured in constant dollars, it pegs oil at $120 a barrel in 2030, up from last year's forecast of $62. Over 2008 to 2015, it predicts the price to average $100. Presenting the report, IEA head Nobuo Tanaka told reporters in London that “while market imbalances will feed instability, the era of cheap oil is over.” Still the concept “cheap” is relative. Oil prices have fallen about 60 percent in four months, plunging from a record $147.27 in mid-July. “We have a pretty good idea that global growth is going to be pretty awful next year and probably not much better in 2010,” said Mark Pervan, senior commodity strategist with ANZ Bank in Melbourne. Meanwhile, in Paris, the world needs the equivalent of four new Saudi Arabias if it is to fend off a looming supply crunch, a top International Energy Agency official said. Fatih Birol, author of the IEA's World Energy Outlook published on Wednesday, told Reuters investment in new output should be increased but warned the global financial crisis could delay crucial energy investment. “Even if growth in global demand was at zero for the next 22 years, in order to compensate the decline in the existing fields, we need to increase the production by around 45 million barrels per day (bpd), which is the equivalent to bringing four new Saudi Arabias to the markets,” he said. Massive investment of $26 trillion will be needed by 2030 to offset the impact of falling supply, IEA said.
