The IEA's base scenario for energy demand has fallen due to the global economic slowdown and higher oil prices, but the agency stressed that a delay in spending on new projects due to the credit crisis could lead to a "supply crunch that could choke economic recovery."
But project delays-and cancellations [image-nocss] in some cases-is precisely what's happening as producers and refiners, large and small, adjust to oil prices that have fallen more than 60% since peaking above $147 in July.
Many companies have slashed their capital spending budgets for at least the coming year. Just last week, ConocoPhillips and the state-run Saudi Arabian Oil Co. said they've postponed construction of a multibillion-dollar refinery in Saudi Arabia because of the uncertain economy.
The IEA expects demand for oil to rise from 85 million barrels per day currently to 106 million barrels per day in 2030 - 10 million barrels per day less than projected last year.
China and India continue to be the main drivers, accounting for more than half of incremental energy demand to 2030, but the Middle East, a longtime supplier, also emerges as a major new demand center.
The agency said that these trends call for energy supply investment of $26.3 trillion to 2030, or more than $1 trillion a year, but it noted that tight credit conditions could delay spending.
"While the situation facing the world is critical, it is vital we keep our eye on the medium to long term target of a sustainable energy future," Nobuo Tanaka, the Paris-based agency's executive director, told reporters at the release of its annual World Energy Outlook report in London.
The IEA is a policy advisor to 28 member countries, mostly industrialized oil consumers.
Last year, Platts, the energy information arm of McGraw-Hill Cos., said companies that produce, refine and transport oil and natural gas will need as much as $21.4 trillion in capital expenditures through 2030 to meet the world's energy demands.
However, Platts also noted the industry already was falling behind the spending curve, in part from limited access to new potential reserves for the major multinational oil companies.
The Organization of the Petroleum Exporting Countries, which pumps around 40% of the world's oil, cut output by 1.5 million barrels per day from Nov. 1 to counter a recent fall in the price of crude from a high of $147 in July to under $59 on Wednesday.
OPEC has also warned that crucial downstream investment-in refining and distribution-will be curtailed if the oil price is not maintained at a reasonable level.
Those curtailments are already happening. In addition to the postponement by ConocoPhillips and Saudi Aramco, North American refining giant Valero Energy Corp. has said it will curtail capital spending for the rest of 2008 and 2009. Also, Marathon Oil Co. said it's delayed expansion of a gasoline refinery in Detroit "due to current market conditions."
The IEA has nearly doubled its forecast for the price of oil over the next twenty years, because of rising demand in the developing world as well as surging costs of production as oil needs to be sourced from more expensive offshore fields and state-run companies.
It hiked its forecast for the price of a barrel of oil in 2030 to just over US$200 in nominal terms, compared to its forecast last year of US$108 a barrel. Measured in constant dollars, it pegs oil at US$120 a barrel in 2030, up from last year's forecast of US$62.
Over 2008 to 2015, it predicts the price to average $100.
Tanaka said that "while market imbalances will feed instability, the era of cheap oil is over." He said that a fundamental change was under way in the upstream oil and gas industry-exploration and extraction-with international oil companies facing dwindling opportunities to increase their reserves and production.
In contrast, national oil companies are expected to account for 80% of the increase in both oil and gas production to 2030.
However, Tanaka said it was "far from certain" those companies would be willing to make the necessary investment themselves or to attract sufficient capital to keep up the necessary pace of investment."
The report also highlighted the expected rapid growth of renewable energy resources. It predicts that world renewables-based electricity generation-mostly hydro and wind power-will overtake gas to become the second-largest source of electricity, behind coal, before 2015.
Meanwhile, the American Petroleum Institute (API) issued the following statement: "The report issued today by the [IEA] underscores the pressing need to do all we can in the United States to develop our own oil and natural gas resources. The new administration and Congress should not re-impose the ban on U.S. oil and natural gas development or otherwise set restrictions that would keep off-limits some of our nation's most promising resources. The IEA warned in its World Energy Outlook that some 30 million barrels per day of new global crude oil capacity is needed by 2015 or the world runs the risk of a 'supply crunch that could choke economic recovery.' The U.S. oil and natural gas industry is ready and able to put our skilled employees and state-of-the-art technology to good use developing America's oil and natural gas resources for the benefit of consumers, strengthening our nation's economy and energy security and providing good jobs for Americans."
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