The global oil market is a beast.

According to the International Energy Agency, demand for oil stands at about 85 million barrels per day. Driven by high demand growth, there is a fear of imminent shortage — that the world will begin to run out of oil.

Such a shortage could be amplified by the substantial and growing demand from the two Asian giants, China and India.

But there is a contrary view: Oil could actually rise faster than it falls over the next decade.

Indeed, the wheels of the oil cycle are slowly turning again as the world moves toward a large, unprecedented buildup of oil supply in the years to come.

Experts like Daniel Yergin, the Pulitzer prize-winning author of The Prize: the Epic Quest for Oil, Money and Power, believe that the capacity to produce oil could grow up to 101 million barrels a day — a 20 percent increase.

Yergin writes that Canada, Kazakhstan, Brazil, Azerbaijan, Angola and Russia are likely to see the largest non-OPEC growth. In the OPEC countries, he said there would be significant oil production in Saudi Arabia, Nigeria, Algeria and Libya. And Indonesia could well be on the list.

On paper, the odds might appear to be stacked against Jakarta though. As the only Asian member of the Organization of Petroleum Exporting Countries (OPEC) before, Indonesia should have reaped handsome rewards, having one of the largest proven oil reserves in the world.

But it turned into a net importer of crude oil in 2005 — losing its OPEC status — as production slumped after being hit by a lack of investment and new exploration because of regulatory uncertainties and political instability since the fall of Soeharto.

Peaking at 1.67 million barrels per day in 1991, oil production has steadily fallen in the last 10 years. It was down to just 1 million barrels per day in 2006, about a 40 percent decline. This resulted in oil exports falling from 1 million barrels per day in 1991 to just 40,000 barrels per day in 2007.

Jakarta has also had difficulty keeping up with domestic demand. Last year, state-owned oil and gas company Pertamina reportedly produced 227.2 million barrels of oil and imported 142.1 million barrels.

This decline resulted from the maturity of the existing oil fields that contributed to Indonesia’s overall production portfolio. More than 90 percent of current oil production comes from mature fields with a decline rate of about five to 15 percent per year.

Indonesia’s oil conundrum will not last forever. If anything, we could be heading for a new dawn.

The oil industry is governed by a “law of long lead times”. In Indonesia — as well as other oil-producing countries — much of the new capacity that will become available in years to come is under development.

The potentially prolific Cepu block on Java — Indonesia’s largest untapped oil deposit — will be a major asset in arresting declining output.

According to estimates, the field contains 600 million barrels of recoverable oil. The best-guess estimate is that the first oil could flow in October this year, building up to a peak production of 180,000 barrels a day by 2010. This would increase total Indonesian oil output by 19 percent to 1.1 million barrels per day.

There is another oil juggernaut worth watching.

In February 2007, Korea National Oil Corporation (KNOC) announced the discovery of a major oilfield in the Wakam Block, offshore of Papua. The field, which KNOC claims contains 671 million barrels, would add substantially to Indonesia’s oil output volume if reserves are proven.

Besides these two oil fields, belated investments could reduce fuel imports for Indonesia. Oil and gas firms have now proposed to invest some US$14 billion this year, about 15 percent higher than originally planned.

As technology improves, the “unconventional” sources of energy will cease being a frontier and will instead become “conventional”. Over the next few years, for example, new facilities will be transforming what are inaccessible natural gas reserves in different parts of the world into a quality, diesel-like fuel.

Yergin argues that cycles of shortage and surplus characterize the entire history of the oil industry. The world has “run out of oil” before — to be exact, five times. He notes that a shortage after World War I was one of the main drivers for cobbling together the three easternmost provinces of the defunct Ottoman Empire to create Iraq. In more recent times, the “permanent oil shortage” of the 1970s gave way to the glut and price collapse of the 1980s.

But each cycle of shortage was followed by periods of surplus. The prevailing climate suggests that risks to growing oil production are unlikely to come from “below ground”. They could stem from “above ground” in the form of political instability, internecine conflicts or poor decision-making on the part of the national governments of producing states.

A less-than-rosy prognosis does little, however, to dampen expectations that there will be more oil in the coming years. But there are challenges.

As Yergin points out in his book, we have become a victim of the “Hydrocarbon Society”, where petroleum has been a symbol of human progress. Despite efforts by the environmental movement to curtail the combustion of all fossil fuels because of the specter of climate change, it will be impossible to break free from the shackles of oil.

Even with greater efficiency, the world might well be using 50 percent more oil 20 years from today. Indonesia is also likely to move along a similar trajectory as the economy develops and a growing middle class emerges.

Oil will continue to gush from the ground in Indonesia and other countries as it has for centuries.

But make no mistake, the global oil market will always remain a beast.

The writer is the chairman of Ancora International and a commissioner of Pertamina

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