Jeff Rubin of CIBC World Markets is forecasting “oil prices almost doubling over the next five years”. That would mean $270 a barrel by 2013. It perhaps explains why the British government is now strongly backing BP to get a big new slice of the oil drilling licenses soon to be issued in Iraq, and — astonishingly — has now also made clear it intends to annex a third of a million square miles of the seabed off Antarctica to pre-empt any rights to the oil it may contain. The fight for oil has begun in earnest.

But is there the oil to go round? The authoritative International Energy Agency foresees an oil supply crunch within 5 years forcing up prices to unprecedented levels and greatly increasing Western dependence on OPEC. And the oil industry itself in its own report Facing the Hard Truths about Energy, produced by 175 authorities including all the heads of the world’s big oil companies, for the first time predicted that oil and gas may run short by 2015.

The geopolitical implications of this gathering crisis for world oil supply 2010-15 are immense. The risk of further military interventions and conflicts in the Middle East is clearly high. Total world oil reserves are estimated at 2.5-2.9 trillion barrels, of which half has now been already consumed, while half of the 51 oil-producing countries reported output declines in 2006. Non-OPEC production is expected to peak and decline within the next five years, driven mainly by burgeoning demand from China and the US, together with restricted output from Iraq. Then in the following five years OPEC’s diminishing spare capacity will probably become increasingly unable to accommodate short-term fluctuations, depending on how fast world demand grows and how extensively OPEC invests in new capacity. The latter may well not raise production capacity high enough or quickly enough, whether for political reasons or because internal decision-making is too slow or the security environment too hostile.

There are of course exits from this doom-stricken scenario, though none is at all credible. First, discovery of major new oilfields could alter the picture. However, though billions have been spent on the search for new fields, discovery peaked in the mid-1960s and the last big ones were found in the 1970s. Only Iraq has undeveloped supergiant oilfields — at West Qurna, Majnoon, and East Baghdad — and the capacity to increase production rapidly to 8-10 million barrels a day; but ironically the US invasion, designed to produce this effect, has ruled out this outcome for a long way ahead. Already four-fifths of the world’s oil supply comes from fields discovered before 1970, and even finding a field as large as the world’s current biggest (Ghawar in Saudi Arabia) — which is anyway almost inconceivable given the huge improvements in geological knowledge in the last 30 years — would only meet global oil demand for another 10 years.

Another option much touted is a large-scale shift to so-called unconventional oil — the Athabascan tar sands (from Alberta, Canada), extra-heavy oil (from the Orinoco belt in Venezuela), oil shale, and mature source rocks. But the almost insurmountable problem is recoverability, whether poor quality oil (extra-heavy oil), poor quality reservoirs (oil from source rocks), or both (oil shale). Worse, production may be uneconomic because of a very low net energy gain, ie it requires almost as much energy to extract the oil as is made available for subsequent use. And the enormous hike in greenhouse gases generated could produce a turbo climate change effect that would wipe out any benefit from a global post-Kyoto agreement.

But even if supply constraints are ineluctable as the explosion of Chinese growth coincides with falling non-OPEC oil production and the beginnings of a slow but remorseless slippage in OPEC capacity, the coming crisis could still be eased by significant demand restrictions. Clearly there is substantial room for energy-saving when half the energy generated every day is wasted and when propulsion of an average car is only about 20 percent efficient, heating of a standard oven only 25 percent, and electricity generated in some power stations only some 35 percent. The question, however, is whether improvement can be secured globally on the level and timescale required to push back the crisis more than a few years. Equally, taking the CO2 out of fossil fuels, especially coal, may be crucial, but a decade at least is needed even to test the carbon capture technology in pilot projects, let alone begin to mainstream it. But the most direct means of constraining world demand would be the proposed Rimini protocol, which prescribes that oil-importing countries cut their imports to match the world depletion rate (i.e. annual production as a percentage of remaining global reserves) now running at about 2 percent a year. Of course, the fundamental political problem remains that the most powerful oil-hungry countries will not agree. If not Kyoto, why Rimini? What is most disturbing of all is that the big powers, so far from seeking major adjustments of their energy policies on either the supply or demand fronts or making a major switch into renewables, are actually massively intensifying their competitive struggle short-term for the limited oil reserves left.