IEA: Low prices no cause for complacency on energy security
The International Energy Agency (IEA) says that in the 2015 edition of its flagship World Energy Outlook publication (WEO-2015).
The report finds that the plunge in oil prices has set in motion the forces that lead the market to rebalance, via higher demand and lower growth in supply, although the adjustment mechanism in oil markets is rarely a smooth one. In the central scenario of WEO-2015, a tightening oil balance leads to a price around $80 per barrel by 2020.
But WEO-2015 also examines the conditions under which prices could stay lower for much longer. Since prices at today's levels push out higher-cost sources of supply, such a scenario depends heavily on the world's lower-cost producers: reliance on Middle East oil exports eventually escalates to a level last seen in the 1970s.
Such a concentration of global supply would be accompanied by elevated concerns about energy security, with Asian consumers – the final destination of a huge share of regionally-traded oil – particularly vulnerable.
Developing Asia, a region in which India takes over from China as the largest source of consumption growth, is the leading demand centre for every major element of the world's energy mix in 2040 – oil, gas, coal, renewables and nuclear. By 2040, China's net oil imports are nearly five times those of the United States, while India's easily exceed those of the European Union.
"It would be a grave mistake to index our attention to energy security to changes in the oil price," said IEA Executive Director Fatih Birol.
"Now is not the time to relax. Quite the opposite: a period of low oil prices is the moment to reinforce our capacity to deal with future energy security threats." ■