When oil almost topped $150 back in July, politicians flew around the world trying to quell the panic it created. Many commentators declared the era of cheap oil over for ever. Now the price has sunk below $50. Politicians are still flying around the world, trying to quell a different form of panic. Many analysts declare that with the recession, and the drop in demand for the black stuff, cheap oil is back to stay.

It isn't. What we are seeing is a temporary respite. The IEA's world energy outlook for 2008, released on November 12, warned that underinvestment in oil and gas exploration is putting the world on course for an energy crunch before 2015.

Underinvestment is likely to prove an understatement. Because of rapid inflation in the paraphernalia of the upstream oil business, the cost of production is now more than $80 in the Canadian tar sands and $70 offshore Africa. These areas, plus the Arctic, are where oil-industry bulls place most of their hopes of meeting future demand. But at current oil prices nobody can invest in them and make money. As a result, to quote IEA chief economist Fatih Birol: "We hear almost every day about a project being postponed."

That, too, may well prove to be an understatement. National oil companies – responsible for around 80% of global production – expect the oil price to fall to $40, according to the head of China's national offshore oil corporation. Such a consensus exists in 27 such bodies from 23 countries, and in their feeling of "panic" they will cancel "most" investment projects.

The oil market has completely disconnected from fundamentals. As the FT put it last week: "Do supply and demand even matter any more when the futures pits have become the tail that wags the dog?"

Citigroup analysts have reported a 460% rise in futures and options positions on Nymex in the last four years. Real physical oil trading has grown, meanwhile, only 9%.

Supply and demand do still matter. Very much so. The IEA's report included a study of 800 of the biggest oil fields, and it shows 6.7% per annum depletion, even assuming heavy investment in the fields. This translates over the next 22 years into a need to find 45m barrels a day of new capacity just to maintain today's level of production. That is four Saudi Arabias. An impossible ask.

As the brewing energy crunch waits in the wings to compound the credit crunch – conceivably, just as we beginning to repair the damage from our toxic derivatives problem – a catastrophic outcome looks ever more likely for the global economy.

Our only hope is to embark on a meaningful Green New Deal, kicking the oil habit, starting tomorrow.