OECD energy watchdog, the Paris-based International Energy Agency (IEA), is forecasting world oil demand could set a new record next year when it smashes through 2008’s pre-recession high.

IEA says that the global demand is rising again — rather rapidly. Its latest Oil Market Report says global demand will reach 86.6 million barrels per day in 2010, and then 87.9 million barrels per day in 2011, assuming a continuing global economic recovery. This means demand is set to pass the all-time high of 86.9 million barrels per day established in 2008 before the global economic downturn.

Indeed the IEA forecast hinges on continued global economic recovery — and that is a big if. Already there are signs that the global economic wheel is faltering. 

Inventories of crude and fuel products in the world’s largest economy, the US, rose to 1.13 billion barrels last week, the highest level since the Energy Department began keeping combined weekly data in January 1990. In simpler terms this means that consumption is not matching, and is rather galloping ahead of supplies.

Signs of slowing economic growth are all around. The demand for fuel products in the US has declined 6 percent to 19.7 million barrels a day since the recession began in December 2007, according to the Energy Department. Just released figures also show an unexpected rise in weekly US jobless claims to half a million, and a big drop in manufacturing activity in parts of the US.

Lower US economic growth means that unemployment will remain higher and factories will need less energy than predicted and fewer jobs also mean fewer people filling their tanks to drive to work and fewer holidaymakers. All is definitely not well with the global economy.

Not everyone agrees to IEA’s projections. The August OPEC Monthly Oil Market Report states that coming “oil demand growth will remain moderate” because of uncertainties about the pace of recovery.

OPEC projects crude demand of 85.5 million barrels a day throughout 2010 (from 85.01 in the first quarter to 86.62 million barrels a day at year’s end). This will rise to 86.56 million barrels a day in 2011 (dipping in the first half of the year to 85.49, and then rising in the second half to 87.71 in the final quarter).

OPEC underlines that a surplus of oil stocks will continue for many months. “Given the current supply/demand outlook, the overhang in inventories is not expected to change significantly in the coming quarters,” OPEC said in its Monthly Oil Report.

OPEC is also concerned over the current state of global economy. “The world economy is facing increasing headwinds that will slow the growth momentum going forward,” OPEC said.

Not only is OPEC’s estimate for 2011 oil consumption is around one million barrels a day lower than that of the IEA (86.56 versus 87.9 million barrels per day, respectively), but it also sees increased non-OPEC output.

The International Energy Agency, however, underlines that 90 percent of non-OPEC oil production growth was expected to come from offshore drilling over the next decade, but this growth is now under threat in the four leading basins: The Gulf, the North Sea, Brazil and Africa. And because of this, the IEA stresses that the global oil output may suffer a 500,000-barrels-a-day hit by 2015 because of the White House ban alone.

However, some others including Harry Tchilinguirian, the commodity strategist at BNP Paribas, is of the view that the rate of increase in demand would abate. “We see global oil demand falling back (next year) in line with global GDP growth,” he said.

The IEA also seems to be insisting on the growing power of the national oil companies. Back in August 2009, Fatih Birol the IEC chief economist underlined, “If these two (lack of investments in the sector and stronger than expected demand growth) marry in two years’ time, in 2013, 2014 we may well see higher prices than we have seen in the recent past.”

And this would mean, Fatih deduced, “the market power of the very few oil-producing countries, mainly in the Middle East, will increase very quickly. They already have about 40 percent share of the oil market and this will increase much more strongly in the future,” he said.

Others differ. OPEC will not remain in existence for another 50 years as the age of oil will end if hydrogen can be produced as an alternative energy source at a low cost, underlines oil guru, industry veteran Ahmed Zaki Yamani. “Demand for oil will drop due to the growing availability of solar, wind and nuclear power as alternative sources for electricity,” he told the Kyodo News.

Although the transportation sector needs gasoline, the consumption of the energy will shrink “step by step” in light of increasing use of biofuel as well as hybrid and electric vehicles, he added. In particular, the “end of oil” will come when it becomes possible to inexpensively produce hydrogen, Yamani said.

And looking at his future prism, the Yamani has absolutely no hesitation in saying “no” to the question of whether OPEC can survive for another 50 years. Asked if the grouping will collapse, he said, “Of course.” 

Yet to the credit of Fatih, one thing has to be clear — he is generally talking about the immediate future, whereas Yamani is talking of a few decades down the road.

Birol indeed has a point when he says that the era of cheap oil is over. One can’t deny that!

When Fatih and the likes say that each barrel of oil that will come to market in the future will be much more difficult to produce and, therefore, more expensive, they definitely have a point. One can’t deny that.

And the debate continues. And it is confusing — not only to you — but to this scribe too — let me concede.