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Forecast for fuel rises, and OPEC contemplates price hikes

Oil consumption is on the rise, and OPEC is eyeing worldwide investments in biofuels.

The International Energy Agency raised its forecast for fuel demand this year. The IEA said global demand is expected to rise 2% to 86.1 million barrels a day in 2007 from a revised 84.5 million barrels a day in 2006. That's 420,000 barrels more than the IEA projected in May and comes after higher-than-expected demand from nations including Indonesia and Singapore. The agency said in its monthly report that it's difficult to escape the conclusion that the oil market will be tight in the second half of the year.

(Editor's note: the IEA comes out with forecasts for energy use in the near term and several decades out. The group's chief economist, Fatih Birol is a great interview, but the data is always scary.)

Interestingly, A.G. Edwards writes: "OPEC Sec. Gen. el Badri suggested the cartel may cut its production investment in response to Western biofuels investments. Though OPEC has voiced its skepticism with regard to biofuels, this is the most direct threat made by the producer group."

I would say that is a threat. And a real one. And what you would expect from an industry with a monopoly on a finite dirty product. If we want alternatives, they are going to make us PAY THROUGH THE NOSE for their existing product while we scale.

Persian Gulf investors, meanwhile, have already begun to sink money into alternative energy concepts such as solar thermal.