Gerard Izuora
The International Energy Agency, IEA, has cautioned oil producing countries that spikes in oil prices are not sustainable for global economy, warning that another spike in crude prices could trigger a strong response in production from countries including US, Brazil, Mexico and Africa.
According to IEA Executive Director Fatih Birol, a second wave of shale oil is on its way and is gaining momentum in response to increase in crude prices. “If we see another price hike coming, there will be a strong response from US shale production, offshore production from Brazil and Latin American countries, Africa and other places. We have seen the first wave of shale coming to markets. It slowed down during lower prices but now we are going to see the second wave of shale coming,” Birol said.
He was speaking to the media at the ongoing 16th International Energy Forum, IEF in India.
Asked to comment on the implications on oil and gas markets if major oil producing countries curtail production further to jack up prices, Birol said: “If established oil producers push up the prices as you describe, we will see a response now from unconventional oil from US, brazil and other places as result of which downward pressure will be exerted on oil prices.” He added the US alone will produce 4 million barrel per day additional crude in the coming years and will meet two-third of oil demand growth in next 5 years.
Talking about the impact of high crude oil prices on import-dependent countries like India, Birol said the price spike it is not good especially for countries like India which are heavily dependent on oil imports. “Indian oil imports will grow more and more in the future driven by transportation sector, petrochemicals sector and others, which means India’s exposure to international oil prices will also increase. Spike in oil prices is not good for India, other importing countries and for the global economy,” he said.
Responding to a question on the threat posed by renewables to the oil and gas industry, Birol said: “Please be careful and understand that renewables are specifically used for electricity generation but we use energy for many other things. So, even though renewables is growing strongly we will need oil and gas for more years to come and countries like India need to look at their Oil and Gas security as well as its affordability for the economy.”
The expected growth from US production, while strong, will not be enough to meet the future demand because global oil demand growth is very strong, mature fields have increased globally where production is on a decline and investments which can secure future production are very low, he said.
“We are going through difficult times when it comes to investments. We feel lack of investment will be a major problem for the oil markets in early 2020s if the current picture does not change,” Birol said, adding that natural gas exporting countries must keep a check on pricing as spikes in natural gas prices will lead the consumers to shift to alternatives sources like coal.