IEA warns oil will hit $200 a barrel by 2030

The International Energy Agency (IEA) yesterday warned that oil prices will continue to climb over the next two decades and could reach $200 (£127) a barrel by 2030.

Releasing its latest forecast, the Agency said that the recent fall in oil prices would prove shortlived and predicted that they would soon rebound back to the $100 a barrel levels seen earlier this year.

The report said that while "market imbalances could temporarily cause prices to fall back, it is becoming increasingly apparent that the era of cheap oil is over," adding that "current global trends in energy supply and consumption are patently unsustainable".

It also claimed that the oil industry will have to invest in excess of £16 trillion over the next 20 years to meet projected demand, as production from older fields declines and oil firms are forced to invest in more costly alternative supplies such as oil from tar sands.

The study will add fresh weight to calls for a huge increase in renewable energy capacity as a means of both cutting carbon emissions and mitigating the risks presented by oil supplies peaking.

A spokeswoman for the UK's largest solar manufacturer, Solar Century, said that the IEA report was "an indicator of the need for the economy to change to a new energy mix".

Her comments were echoed by Nick Medic of the British Wind Energy Association (BWEA), who argued that in the long term renewable energy sources had the potential to deliver a more stable energy supply than oil. "This kind of price volatility with oil will encourage countries to realise an energy mix with a greater share of renewables is going to provide a more reliable supply of energy at a more stable price," he said.

A spokesman for wind firm Vestas agreed. "Wind remains free while oil becomes more expensive, that can only make us more competitive," he said.

The IEA report follows a separate study from the new UK Industry Taskforce on Peak Oil and Energy Security last month which predicted that oil supplies could peak as earlier as 2013.

Former Shell chairman Ron Oxburgh said in the foreword to the report that a shift away from fossil fuels was now essential. "Today’s high prices are sending a message to the world that words alone have failed to convey, namely that not only are we leaving the era of cheap energy but that we have to wean ourselves off fossil fuels," he said.

The IEA report predicted renewables would grow at the rate of about seven per cent a year. However this growth would still only lead to them making up four per cent of the global energy mix by 2030, up from one per cent in 2006.