Author: 
Agence France Presse
Publication Date: 
Wed, 2004-10-27 03:00

LONDON, 27 October 2004 — World oil prices will be driven down over the next two years due to there being enough crude to meet soaring demand, Claude Mandil, executive director of the International Energy Agency (IEA), said here yesterday.

Supply and demand “fundamentals do not justify current oil prices”, Mandil told reporters gathered at the Oil and Money conference in London. “Current prices are not sustainable and market fundamentals will drive them down in the next two years,” he added.

Mandil spoke as the IEA said global oil reserves would remain abundant for several decades despite a surge in energy demand.

Nevertheless, the IEA said vulnerable supply routes and reliance on fossil fuels loom as potential risks. New York’s main oil contract hit an all-time high of $55.67 a barrel on Monday on fears of a major disruption in Norway, which has since faded, easing prices.

World oil output should not peak before 2030, but about $3 trillion may need to be invested to meet an expected 60 percent surge in consumption, the IEA said yesterday.

The Earth contains more than enough energy resources to meet demand for many decades to come,” Mandil said.

Even so, Mandil acknowledged that rising international demand, growing threats to supply security, regular spikes in international energy prices and increasing energy-related emissions were troubling. “They are symptoms of a malaise in the world of energy,” Mandil said. “They call for urgent and decisive policy responses.”

World oil demand is forecast to grow from 77 million barrels per day in 2002 to 121 million bpd in 2030. Two thirds of growth will come from developing nations, mainly for transport fuel. “Huge investments will be needed in oilfields, tankers, pipelines and refineries. Financing will be a major challenge,” said the IEA, which advises 26 industrialized nations on energy.

In all $16 trillion needs to be spent on energy facilities by 2030 at a rate of $568 billion a year - 37 percent higher than the most recent annual figure, the IEA said.

Energy firms have spent cautiously on new projects since a price crash in 1998-1999 and barriers to foreign investment in the Middle East have stunted development of that region’s vast reserves. “The major problem is that investments are not going to the right places at the right time,” said the IEA’s Chief Economist Fatih Birol.

As world trade in oil doubles over the next 25 years to 65 million barrels per day, pressure will intensify on supply chokepoints which threaten security of flows, the IEA said. “Major oil and gas importers — including most OECD countries, China and India — will become ever more dependent on imports from distant, often politically-unstable parts of the world,” it added.

OPEC’s low-cost, large-scale reserves will meet much of the demand growth to 2030, the IEA said. OPEC’s market share is projected to rise from 37 percent in 2002 to 53 percent in 2030, the agency said. A long-term upward shift in oil prices would curb fuel demand growth and hurt OPEC by driving consumers away from the organization’s supply, the IEA said.

OPEC’s cumulative oil revenues over the projection period would be 7 percent, or $750 billion, lower, as the organization would have less room to expand production, the IEA said. “A sustained higher oil price would choke off energy demand generally and would prompt switching from oil to other fuels,” the IEA said.

The world could also cut 10 percent from energy demand growth to 2030 and slow the rise in greenhouse gas emissions by adopting efficiency and environmental rules, the IEA said. World carbon dioxide emissions are currently forecast to soar 60 percent by 2030 due mainly to a rise in pollution from developing countries, especially China and India, it said.

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