Rising crude oil prices have the potential to weaken robust oil demand growth around the world, the International Energy Agency (IEA) Executive Director Fatih Birol said on Thursday.
At the Columbia University 2018 Global Energy Summit, Birol discussed the global oil market, CO2 emissions, renewable energy, natural gas and electricity markets.
While crude oil prices have been recently hovering around their highest levels in the past three and a half years, Birol said some oil producers around the world want even higher crude prices than the present rates.
'If we see sustained higher prices than current levels, there will be two effects. One, U.S. shale or Brazilian offshore will be much stronger than we have now. Second, robust oil demand growth may well be weaker than what we assume as a result of high prices,' he said.
Birol said the global oil market is already tightening on top of geopolitical tensions around the world, including Syria and Yemen, which have given an additional boost to prices.
However, he warned, 'a major risk to the supply here is Venezuela. Oil production has halved since Mr. Chavez took office. We have never seen in the history of oil such a big and unplanned reduction of oil production in a country that has some of the richest oil reserves.'
The IEA chief affirmed that the level of investments in the global oil industry is still very weak against the rise in oil demand.
'Each year we lose 3 million barrels per day (mbpd) in aging fields. It means every year we need to increase production by 3 mbpd to compensate for the decline in fields, plus 1.5 mbpd to meet demand growth. When you look at this combined 4.5 mbpd, we may see some surprises in 2021 and 2022. That's why we need investments,' he explained.
He also suggested that rising global oil demand and consumption brings the question of whether more fuel efficiency measures are prudent, considering that CO2 emissions are on the rise.
'Last year, we saw a significant increase in fossil fuels -- oil, gas and coal. Also, renewables increased substantially. But energy efficiency improvements were very poor, and as a result of that we have seen global CO2 emissions increase,' Birol said.
'When we look at the oil debate, peak oil demand is focused on electric cars. All the passenger cars alone constitute only 25 percent of global consumption. The growth is coming from trucks, jets, and the petrochemical industry. These are the drivers. [Oil] Demand growth is not coming from cars. Today, one-third of the global oil demand growth comes from Asian trucks only. Petrochemicals are also a major driver of oil demand growth,' he explained.
Birol said more than 50 countries in the world have fuel efficiency standards, but only four countries have efficiency standards for trucks.
'Putting some efficiency standards there would help. It is much easier, more short-term and a very effective way of slowing down oil demand growth,' he said.
In addressing CO2 emissions, Birol said the main issue is the power sector, especially coal in Asia, but added that China, [Asia's powerhouse] has become more careful in this regard because of local pollution in cities.
'China is entering the global gas market as a giant importer now. Thirty percent of the global growth in gas last year came from China alone. They are replacing coal with gas, especially in coastal areas for heating and also in industry. Most of this is coming out of policy decisions ... I hear the footsteps of China entering the global gas market as a giant importer,' he said.
He stated that India is also making inroads in gas, solar, and electrification, noting that the country is expected to bring electricity to 500 million people in about 10 years.
While China and India look to have resolved their rising local demand for electricity, Africa remains a major challenge, Birol argues.
The IEA chief said around 1.6 billion people had no access to electricity in 2002, and added that at that time electricity access was a major problem for China, India and sub-Saharan Africa.
However, in 2015, China fixed this problem, while India is close to fixing it in a year or two, he said.
However, today there are still one billion people in the world who have no access to electricity, most of whom live in sub-Saharan Africa, Birol said.
'The electricity access problem is now becoming mainly a sub-Saharan African problem. Two out of three people in Africa have no access to electricity and this is a real shame. When you look at Africa today, they have the largest energy sources -- hydro, solar, geothermal and wind -- huge gas resources from Nigeria to other areas like Mozambique and Tanzania, among others,' he said.
'I'm very excited to see that many African governments are taking the access issue seriously at a time when the cost of renewables is going down,' he concluded.
By Ovunc Kutlu in New York
Anadolu Agency
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