The world is on the eve of a new energy order that is going to change the way that Middle Eastern suppliers and consumers around the world do their business. This is not the opinion of a radical environmentalist or even of prominent ecological activist and former U.S. Vice President Al Gore.

Fatih Birol is chief economist of the International Energy Agency, the Organization of Economic Cooperation and Development-affiliated agency created after the oil shocks of the 1970s to coordinate the West's reaction to energy crises.

Birol, a former Organization of Petroleum Exporting Countries official, presented the findings of the IEA's flagship publication "World Energy Outlook 2007: China and India Insights" this week to U.S. Congress on Capitol Hill in Washington.

He highlighted several trends that will pose major challenges to advanced economies and developing nations alike.

The rise of demand in China, India, other developing countries and even oil and gas producing states, insufficient levels of available supply, and a woeful lack of investment driven by "resource nationalism," are quickly transforming energy markets. This will have major implications to both Middle Eastern producers and consumers world wide.

The Gulf is the richest and most important oil region in the world. In 2006, Gulf countries produced 28 percent of the world's oil and held over half of the world's oil reserves.

Birol stressed that non-OPEC production is projected to fall by 2015, and most of increases in production must come from OPEC, primarily the Gulf. Saudi Arabia is they key oil producer that holds 25 percent of the world's reserves and holds the title of the world's only swing producer.

Saudi Arabia maintains the world's largest crude oil production capacity, estimated to be around 11.3 million barrels a day. The kingdom plans to increase its oil production capacity to 12.5 million barrels a day by 2009. Saudi Arabia is seeking to stay ahead of the demand curve, with a policy that seeks to maintain excess capacity. However, its swing producer power is declining as it currently has only between 1-2 million barrels a day of excess capacity.

In Birol's opinion there are some serious transparency issues with the Saudi reserves. In a revealing interview for the French daily Le Monde in July, he effectively said that peak oil is just around the corner, and that without a drastic increase in Iraqi production the world will be in a crunch by 2015.

The Saudi government claims 230 billion barrels of reserves, and I have no official reason not to believe these numbers. Nevertheless, Saudi Arabia - as well as other oil producing countries and companies - should be more transparent with their numbers. Oil is a crucial good for all of us and we have the right to know how much oil, as per international standards, is left.

This is the closest an international civil servant can come to criticize the most powerful member of OPEC.

Most of the increases in production will have to come from OPEC areas and the national oil companies therein, the IEA says. OPEC members outside the Gulf (excluding Angola) are projected to increase their production capacity only moderately. This leaves the Persian Gulf and, specifically, Saudi Arabia, Iran, and Iraq.

While the Saudis at least are trying to contribute their share to supply increase, Iranian oil sector mismanagement is famous. Due to massive subsidization аnd growing demand for gasoline, and shortage of gas for oil well injection, Iran might stop exporting natural gas by 2015.

Iraqi political instability is effectively closing the door on their production increases, cutting the global supply and driving prices up.

Another important trend is resource nationalism. International oil companies no longer wield their historic power. It is the national oil companies that that will largely determine future oil supply.

The other trend taking place with net oil exporters is the negative feedback loop. The higher the price of oil, the more oil exporting economies boom, thereby stimulating their domestic demand. This leads to falling net exports, and even higher prices. According to a recent report by Lehman Brothers Inc, OPEC countries will match rival China in global oil demand growth through 2008 and beyond. It is this rising demand from oil exporting countries and major consuming countries that may offset the Saudi increases.

As the IEA report makes clear, much of China and India's future oil imports will have to come from the Middle East. China and India are transforming global energy markets through their sheer size and pace of growth.

In the IEA publication's reference scenario, (projections based on government policies and current economic growth rates) China is set to surpass the United States as the world's top energy consumer in 2010. What is more, between now and 2030, China and India will account for 70 percent of new global oil demand, and 80 percent of global coal demand.

Together, the two countries will account for about 45 percent of the increase in global demand through 2030. This growth will not occur in a vacuum: During this period, the world's energy needs are expected to be more than 50 percent higher in 2030 than current levels. It is unclear how this energy gap will be bridged and by which producers. Suffice it to say, the IEA is not optimistic.

Recently, when speaking about the rising demand from China and India and a host of pressing supply problems, Nobuo Tanaka, executive director of the IEA, stated that, "a supply-side crunch in the period to 2015, involving an abrupt escalation in oil prices, cannot be ruled out."

Birol explained the numbers behind this potential crunch. According to him, an additional 37.5 million barrels per day will be required to meet demand by 2015, but only 25 million bpd are planned. Consumption is expected to rise from today's 85 million bpd to 116.3 million in 2030.

In order to meet this demand the world is going to need a lot more production capacity - more than may be available. A tremendous amount of investment will be necessary. In fact, the IEA report states that an incredible sum - $22 trillion of investment in new fields and supply infrastructure - will be needed between 2006 and 2030.

Clearly, mobilizing these investments will be challenging. While there are a number of fields under development, new finds are expected to be more challenging geologically and geographically. The concern is that these fields will be expensive and whether they can be brought to the market in time to satisfy demand.

While the peak energy demand may be good for the Middle Eastern supplier, increasing geopolitical scrambling by global players and unstable domestic politics will remain a threat. At times, a boom is as difficult to manage as a bust.

Vigilance, economic liberalization, developing financial infrastructure and the rule of law, diversification away from crude exports - and away from oil and gas altogether - may mitigate future risks.

Developing astute domestic, diplomatic, and security policies are the only prescriptions that may see the producers through these uncertain times.

Ariel Cohen is senior research fellow at the Heritage Foundation and senior adviser to the U.S.-Ukraine Business Council.