Opec has made a scathing attack on a report from the International Energy Agency which says that the world's existing oil producers face a “huge challenge” to keep up with a projected rise in global demand.

The report from the IEA, the respected Paris-based energy advisor to the Organisation for Economic Co-operation and Development (OECD) club of wealthy nations, said that to compensate for the depletion of existing oilfields, by 2030 the world would need to find new production equivalent to 45 million barrels per day, or the output of four Saudi Arabias, to maintain present levels of supply.

It added that additional production equivalent to six Saudi Arabias would be required if a projected rise in oil demand from 85 million barrels a day to 106 million was taken into account.

The IEA, which based its findings on a landmark study of decline rates at 800 of the world's largest oilfields, said that there was, in theory, enough oil left in the ground to meet demand. However, it would require investment of about $450 billion (£300 billion) a year, with the bulk of this spent in the 13 member states of Opec, where most of the world's remaining supplies lie.

Abdullah al-Badri, Opec's secretary-general, gave a withering verdict on the study. “I don't trust this report,” he said. “I don't think the IEA is equipped to review these oilfields...I don't see how it will be useful.”

He said that Opec, the cartel of 13 oil-exporting countries that produces 40 per cent of the world's oil, had not been involved in drafting the study, which he dismissed as alarmist. “We have the reserves, we have enough oil for the foreseeable future,” Mr al-Badri insisted.

Speaking at the London launch of the IEA's 2008 World Energy Outlook report yesterday, Nobuo Tanaka, the agency's executive director, a leading energy expert, adopted a markedly different tone, sounding a grave warning about the energy challenges facing the world. “Current trends in energy supply and consumption are patently unsustainable - environmentally, economically and socially - they can and must be altered,” Mr Tanaka said. He added that an “energy revolution” was needed urgently to meet surging global demand, which he predicted would soar by 45 per cent by 2030 - driven mainly by China and India - while also adopting low-carbon sources of power to prevent catastrophic climate change. Please login or register to see the full article

When billionaire oilman and investor T. Boone Pickens launched his plan this summer to boost the use of wind and natural gas to ease American dependence on foreign oil, gasoline prices were at a record $4.11 a gallon and oil prices were at $147 a barrel.

Now oil prices are at a 20-month low, falling to $59.33 a barrel on Tuesday, and gasoline prices have plummeted to below $2 a gallon in many parts of the country.

"I think I've done a pretty good job," he said, generating a laugh at the annual Edison Electric Institute convention of the nation's power executives.

Pickens acknowledged later at a news conference that there is more than one factor for the collapse of oil prices, including the slowing economy that many analysts say has gone into a recession.

Now with oil prices down, Pickens has said he has reduced what he planned to spend on his campaign -- trimming spending to $40 million to $50 million from his initial plan of about $60 million.

He also said the collapse in natural gas prices has forced him to put his wind farm project for Texas on hold.

Pickens has leased hundreds of thousands of acres for a giant wind farm in West Texas, where he plans to erect 2,700 turbines and produce energy for urban areas such as Dallas and Fort Worth.

Historically, there is much less talk about turning to renewables when energy prices get low.

But Pickens said not to worry, oil prices will be heading back up and soon.

"I don't see any lower than it is today," he said.

He said that oil will be back to $100 a barrel within a year and that all other commodities will jump back up as well -- making his plan more viable.

"Oil is not going to save us," he said of plans to increase drilling in the U.S.

Pickens' plan focuses on using natural gas as a transportation fuel and then counting on wind and solar to take the place of natural gas as a source to generate electricity. Natural gas currently generates about 20 percent of the electricity in the U.S.

He also touted coal, solar and nuclear power to help generate more energy and then for a transmission system that will bring the power generated by wind from the Midwest to other parts of the country.

He said if his plan is implemented, oil imports can drop 30 percent to 40 percent within three to five years.

"I see myself very much as a pioneer," he said. "I understand the problem and realize something has to be done."

Like other investors, Pickens has been hit hard by the collapse of stock prices. He said his hedge fund is down 62 percent since July.

Chinese Premier Wen Jiabao said rich nations must abandon their "unsustainable lifestyle" to fight climate change and expand help to poor nations bearing the brunt of worsening droughts and rising sea levels.

Wen told the opening of a conference on Friday the financial crisis was no reason for rich nations to delay fighting global warming.

"As the global financial crisis spreads and worsens, and the world economy slows down apparently, the international community must not waver in its determination to tackle climate change," Xinhua news agency quoted him as saying.

The two-day meeting is to push China's call for rich nations to fund a huge infusion of greenhouse gas-cutting technology for developing countries. But foreign officials at the meeting raised doubts about Beijing's proposal, which could stoke contention over who pays and how much.

China is widely believed to be the biggest emitter of carbon dioxide, the main greenhouse gas from industry, power plants and vehicles lifting global temperatures. But Wen threw the onus back on rich nations, with their much higher emissions per person and long history of polluting the air.

"Developed countries shoulder the duty and responsibility to tackle climate change and should alter their unsustainable lifestyle," he told the meeting.

Chinese officials have said wealthy nations should divert as much as 1 percent of their economic worth to paying for clean technology transfers and helping the Third World overcome damage from the rising temperatures bringing more heatwaves and droughts, more powerful storms and rising sea levels.

This would mean a total $284 billion a year if members of the Organisation for Cooperation and Economic Development (OECD) paid up based on the size of their economies in 2007.

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The sharp decline in the oil price from its high earlier in the year has, for the time being at least, taken some of the urgency out of the debate over energy supplies.

Yet the underlying geopolitical tensions are still there. Many commentators see the recent Russia-Georgia conflict as a result of pipeline politics between major powers, who are jostling to control the energy resources of the Caspian basin and Middle East. With the increase in oil prices over the last decade, and the painful dependence of many countries on hydrocarbons becoming ever clearer, the search for alternative energy sources is still a vital one. As a commentator in the Financial Times put it in a recent article, "The need for a transition to a more diversified, lower-carbon energy economy is as urgent as ever."

Definitions of alternative energy diverge a little - some take the term to include only fuel sources that do not harm the environment or use up natural resources (for example wind, solar, biomass, geothermal, wave and tidal energy), others include all energy sources other than from fossil fuels (so also including nuclear power, for example). In the US ETF market there is now quite a sophisticated choice of funds for investors to choose from in this sector, including diversified clean energy ETFs, with the largest fund of this type, the PowerShares WilderHill Clean Energy Portfolio, now totalling nearly $1.5 billion in assets, but also several specialised ETFs covering solar, wind and nuclear energy producers. How do things look for European ETF investors by comparison?

Although the FTSE ET50 index also includes water technologies and pollution control, and waste and resource management stocks, I've included it in this comparison because of the large weighting it devotes to companies involved in alternative energy and energy efficiency. However there's a clear overlap - as far as this index is concerned - with the universe covered by water ETFs.

As might be expected from a relatively new sector of the ETF market - the oldest fund in the table above has just over a year's track record - there is a proliferation of indices to reckon with. Let's dig deeper into index methodologies for the four non-nuclear ETFs.

The Lyxor New Energy ETF is relatively concentrated, with only twenty constituents. By contrast the PowerShares Global Clean Energy ETF is much more diversified, due to its equal-weighting methodology, with all the holdings set at a 2% weighting when rebalanced. The iShares S&P Global Clean Energy and EasyETF FTSE ET50 ETFs fall somewhere between these two extremes in terms of concentration.

In summary, expect pretty divergent performance from the different alternative energy indices.

How have the ETFs fared during the bear market, and what does the investment case look like for this sector?

This year has been a brutal one so far for holders of the funds - their performance has been much worse than that of the broad market, with a precipitous decline from September onwards. All three of the ETFs that were launched last year have lost more than half of their value from their January highs. The PowerShares Global Clean Energy ETF has declined by 54% from its peak, the iShares S&P Global Clean Energy ETF has fallen nearly 60%, and the Lyxor New Energy ETF is down 57%.

Is this a buying opportunity? The bullish argument is set out in a recent Lyxor presentation, which points out that renewable energy sources currently meet around 13% of global primary energy requirements, while some experts expect this figure to rise to 50% by 2050. Ian Simm, the CEO of Impax, a London-based fund manager specialising in the environmental sector and which provides the specialist design input to the FTSE ET50 index, points out that the alternative energy and waste/water sectors already generate hundreds of billions of revenues worldwide each year, with forecast annual growth rates of 15-20%. In Simm's view, this trend is well-supported by both public and private sector spending.

On the other hand there are plenty of sceptics - Roger Nusbaum of Seeking Alpha has written of a fad in solar stocks, while others have pointed out the distortions introduced to the global energy market and the unforeseen environmental impact of state support for biofuels. The recent stock price collapse of NASDAQ-listed ethanol producer, Biofuel Energy, hasn't helped sentiment, and biofuel stocks in general have had a terrible year.

But at the same time comparisons with the dot-com bubble seem overstated. Taking the current top ten holdings in the iShares fund (and excluding two that have no earnings), the average forecast p/e ratio is currently 12 - hardly in the stratosphere. Others have pointed out that, while a dot-com start-up required little more than an idea, a garage and a computer, alternative energy companies need substantially more in terms of research and development, so barriers to entry in this sector are considerably higher. Whatever way you look at it, investing in the sector via an ETF seems to make sense, as a diversified spread of companies gives you a better chance of picking some winners in what is bound to remain a volatile area of the market.

The assets raised by the European alternative energy ETFs are still tiny - both in the context of the overall market size, and by comparison with similar US ETFs. But active product development continues - Impax and FTSE recently launched an "Environmental Opportunities Index", which might form the basis for another ETF, and the Index Group at Société Générale, parent company of Lyxor, already calculates a number of indices under a "sustainable investment" banner, including BIOX (World Bio Energy) and SOLEX (World Solar Energy), which are not yet available in ETF form, but could no doubt easily be added to Lyxor's range.

Despite this year's decline in oil prices, it seems a fair bet that a return to cheap energy is not on the cards. With the longer term demand/supply outlook still in favour of higher prices, and geopolitical tensions adding to the mix, the alternative energy sector should find some underpinning as one of the true potential growth sectors in the equity market.