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IEA raises oil price outlook on supply uncertainty
Fuel subsidies to double to $600 billion in 2015.
November 9, 2010 2:11 by Reuters
Oil prices will exceed $200 a barrel in 2035, the International Energy Agency said in its 2010 World Energy Outlook.
In the report, released on Tuesday, the IEA raised its mid and long-term oil price forecasts, despite slashing oil demand growth estimates by 2035, citing growing supply uncertainty.
Oil prices would rise even further if governments did not act to curb consumption, the IEA’s chief economist and author of the report, Fatih Birol, told Reuters in an interview.
“The message is clear, the price will go up, especially if consuming countries do not make changes in the way they consume oil, especially in the transport sector,” Birol said.
He said the world needed higher oil prices to substantially change consuming habits and spur investment as markets were becoming less sensitive to price changes.
“All the net growth comes from non-OECD countries, almost half from China alone, mainly driven by rising use of transport fuels,” the IEA said in the executive summary of its outlook.
The growing concentration of oil use in transport and a shift of demand towards subsidised markets were limiting the scope for higher prices to choke off demand through a switch to alternative fuels, the Paris-based IEA said.
“If subsidy policy does not change, with increasing price assumptions, these $312 billion in subsidies for 2009 will reach $600 billion in 2015. That’s huge,” Birol said.
But while the IEA increased its price forecast, it also cut its demand growth estimate for the next 25 years by 6 million barrels per day (bpd) to 99 million bpd.
This remains a 15 million-bpd increase, the oil output size of one and a half times Russia, on today’s level.
The IEA, which advises 28 industrialised nations on energy policies, said it expected conventional crude oil output to flatten in the next 10 years.
“Crude oil output reaches an undulating plateau of around 68-69 million barrels a day by 2020, but never regains its all time peak of 70 million barrels per day reached in 2006,” the IEA said.
Oil hit $87.49 a barrel on Monday, the highest since Oct. 2008, after hovering around $70-80 most of the year.
(Editing by William Hardy)