In the circumstances, the era of cheap oil is over and prices could soon be back up to $100 a barrel.
In its World Energy Outlook for 2008, IAEA says prices could soar as high as $200 a barrel by 2030.
In one scenario considered by the IEA, China and India will account for just over half of the increase in world primary energy demand between 2006 and 2030, and much of the increase in world oil demand.
Still the immediate risk to supply, it says, is not one of a lack of global resources.
Instead, it points to a lack of investment where it is needed.
The world, the report's authors conclude, is not running out of oil just yet - indeed, there is enough of it to supply the world for more than 40 years at current rates of consumption.
But, they point out, field by field, declines in oil production are accelerating and more money will be needed in research and development to extract the oil there is.
A significant amount of the $26 trillion suggested, $8.4 trillion, will need to be spent on oil and gas exploration and development.
But despite the agency's assessment of oil and gas reserves, the report contains a stark warning of the consequences of continuing to rely on fossil fuels.
The consequences for the global climate of policy inaction when it comes to decarbonising the world economy are "shocking", according to the report.
"Strong, co-ordinated action is needed urgently to curb the growth in greenhouse gas emissions and the resulting rise in global temperatures," it said.
Emissions of two greenhouse gases, methane and carbon dioxide have reached record high, says World Meteorological Organization, an agency of the United Nations.
Many greenhouse gases occur naturally, such as water vapor, carbon dioxide, methane, nitrous oxide, and ozone. Others such as hydrofluorocarbons (HFCs), perfluorocarbons (PFCs), and sulfur hexafluoride (SF6) result exclusively from human industrial processes. Carbon dioxide is released into the atmosphere by the burning of solid waste, wood and wood products, and fossil fuels (oil, natural gas, and coal).
Nitrous oxide emissions occur during various agricultural and industrial processes, and when solid waste or fossil fuels are burned. Methane is emitted when organic waste decomposes, whether in landfills or in connection with livestock farming.
Methane emissions also occur during the production and transport of fossil fuels.
When sunlight strikes the Earth's surface, some of it is reflected back towards space as infrared radiation (heat). Greenhouse gases absorb this infrared radiation, trap the heat in the atmosphere and reemit the waves downward causing the temperature of the earth to go up.
And this is called the "greenhouse effect," because of a similar effect produced by the glass panes of a greenhouse, where plants are grown under controlled conditions.
The World Meteorological Organization's annual Greenhouse Gas Bulletin provides widely accepted worldwide data on the amount of heat-trapping greenhouse gases in the atmosphere.
To avoid the worst, emissions should be reduced by 25 percent to 40 percent below 1990 levels by 2020, the Nobel Prize-winning UN Intergovernmental Panel on Climate Change has said.