Oil demand is expected to grow between 0.4% and 1.4% annually after 2009, depending on the pace of global economic recovery, the International Energy Agency (IEA) says.
The intergovernmental organisation, which acts as energy policy adviser, says in a statement that oil prices have recently risen again. This is partly because of the perception that the world economy is recovering, but if oil prices rose too rapidly they could damage such a recovery.
“Whether we end up facing a supply crunch again by mid-decade, or with a more comfortable buffer of supply flexibility, depends largely on the pace of economic recovery and government action on efficiency,” Nobuo Tanaka, the executive director of the IEA, is quoted in a statement. He presented the IEA’s annual Medium-term Oil Market Report 2009 in Paris today.
Even though oil prices have strengthened recently, they are at about half the level seen in July 2008 when they peaked at $147 a barrel.
Two years of global oil demand contraction in 2008 and 2009 reflect the worst economic recession in over 50 years. Oil and gas markets face enormous uncertainty surrounding the timing, pace, and extent of any economic rebound, the IEA says.
By 2014, it is likely that Asia and the Middle East will generate the bulk of demand growth while non-OECD (Organisation for Economic Co-Operation and Development) demand will clipse. It also forecasts that oil supply capacity will grow by 4m barrel a day between 2008 and 2014. This will be 1.5m barrel less than in last year’s outlook.
The IEA says the bulk of this growth comes from Opec (Organization of the Petroleum Exporting Countries) crude capacity, Opec gas liquids, and global bio fuels. Spending curbs and endemic new project slippage see total non-Opec supply levelling off at 50m-51m barrels a day.
According to the IEA, supply could be lower still if upstream spending curbs were to extend beyond 2009, but producer and consumer governments can also influence the path that oil markets take.
“A return to razor-thin crude oil spare capacity and resultant price volatility are in the interests of neither producers nor consumers,” Tanaka says.