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A recovery in crude demand following a scaling back of investments in the oil sector could lead to a future supply shock and a return to $100-plus oil.

When asian consumers met with arab oil ministers in Japan last week, top of the agenda was the very real concern of a future oil supply shock.

It followed a stark warning days earlier by the International Energy Agency (IEA) that the world was facing a possible crude shortage by 2013, due to lower investments in oil exploration and production by Organisation of Petroleum Exporting Countries (OPEC) members and other oil producing nations.

Gulf OPEC members have been warning for months about the risk of another sharp spike in prices unless much-needed investments are made in the sector.

Refineries across the region are operating at semi capacity and governments are gradually scaling back drilling projects due to a squeeze on revenues, following a dive of two-thirds in the value of crude from highs of $147 last July to about $50 a barrel.

The price plunge has been caused by a steep fall in demand amid the world’s worst economic recession in 60 years. But fears are growing that as the first shoots of economic recovery begin to emerge around the world, a renewed surge in global demand for the commodity, hampered by a period of reduced investment in the sector, could lead to a supply shock — sending prices soaring through the $100 barrier again.

“It’s not a question of whether, but when,” says Jens Zimmermann, an equity analyst at ABN Amro, who anticipates a price spike coming before 2012. “It depends on whether the government financial stimulus packages show some positive results, especially in China, the US and Europe.”

Longer term, the fundamentals for oil consumption remain strong. The IEA expects oil demand to rise by about one percent annually over the next four years. OPEC, meanwhile, believes that world oil demand will grow by around a third to reach 113 million barrels per day (bpd) by 2030. Ninety percent of this growth, OPEC says, will be in developing countries, led by the emerging economies of China and India. Both were pushing up fast until the onset of the global downturn.

China recorded 13 percent growth in 2007 while India achieved two consecutive years of nine percent growth, until the financial crash hit their economies last year.

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