Suggested by EB contributor Ian McPherson, who writes on his blog:
Michael Kumhof explains the International Monetary Fund (IMF) Research Department’s new, strikingly more accurate, oil supply/price/demand prediction model, and says that according to the model oil prices will need to double in a decade to grow world oil production by 0.9%, in line with published EIA predictions*.
The world economy could not cope with a doubling of oil prices, which begs the question of whether world oil production can be increased at all, at a price that anyone can afford.
Kumhof is very careful to stress the uncertainties surrounding the IMF’s predictions (see Working Paper below), but brings the world a message that any reasonable growth in world oil production will be accompanied by serious episodes of demand destruction.
* It should also be noted that the Working Paper does not represent the views of the IMF. This is normal with IMF Working Papers.