Lord Oxburgh, the former chairman of Shell, has issued a stark warning that the price of oil could hit $150 per barrel, with oil production peaking within the next 20 years.
He accused the industry of having its head "in the sand" about the depletion of supplies, and warned: "We may be sleepwalking into a problem which is actually going to be very serious and it may be too late to do anything about it by the time we are fully aware."
In an interview with The Independent on Sunday ahead of his address to the Association for the Study of Peak Oil in Ireland this week, Lord Oxburgh, one of the most respected names in the energy industry, said a rapid increase in the price of oil was inevitable as demand continued to outstrip supply. He said: "We can probably go on extracting oil from the ground for a very long time, but it is going to get very expensive indeed.
"And once you see oil prices in excess of $100 or $150 a barrel, the alternatives simply become more attractive on price grounds if on no others."
Lord Oxburgh added that oil majors must invest more heavily in developing viable alternatives to oil and gas. "If you look at it from oil companies' point of view, effectively what they're doing at the moment is continuing business as usual, and sticking their toes in the water in a number of areas which might become important in future.
"But at present there is a relatively poor business case for making significantly greater investment in these new areas."
Commenting on whether "peak oil" – the point when global oil production goes into terminal decline – was likely to be reached in the near future, he said: "In a way it scarcely matters; what really matters is the gap between production and demand. I don't know whether there is going to be a peak in world oil production, whether it's going to plateau and then slowly come down.
"It could well plateau within the next 20 years, and I guess I would be surprised if it hadn't."
The price of crude oil closed above $80 a barrel for the first time on Thursday, as a hurricane in Texas raised supply concerns.
US light crude hit $80.20, two cents higher than the price it touched on Wednesday. Oil prices have risen 30 per cent since the start of this year and are four times higher than their 2002 level.
The latest figures from the US Energy Information Administration show that global liquid fuels production in August was almost a million barrels per day lower than the same period in 2006.
The International Energy Agency has forecast what it calls an oil "supply crunch" by 2012, a prediction that Lord Oxburgh said could possibly come to pass. Lord Oxburgh is currently chairman of D1 Oils, a biodiesel company listed on the AIM market.Reuse content