Baku, March 7, AZERTAC
The International Energy Agency (IEA) foresees crude oil prices rising sharply by 2020 due to falling investment in new oil projects, its Executive Director Fatih Birol said Monday, according to Anadolu News Agency.
"We see significant risk of prices rising sharply starting from 2020, unless a significant number of projects are sanctioned soon," Birol told the IHS CERAWeek 2017 energy conference held in Houston, Texas.
"In 2016, there was $450 billion investment in oil investment. This is 25 percent below the previous year. Investment must increase at least 20 percent every year to compensate for demand growth," said Birol, a Turkish economist and energy expert who has headed the IEA since 2015.
Due to low oil prices since mid-2014, oil producers post major losses every quarter. This makes it difficult for them to find capital to make new investments, thus raising the risk of a shortage in global supply in the near future.
"Signals we get from oil companies [both national and private] are not very encouraging. There has been two years of substantial decline in investments," Birol said.
Birol said their main worry is the decline in upstream investments. "In 2017, if we don't see a substantial increase, the market tightens after 2020. Spare production capacity shrinks to historically low levels."
He noted that spare production capacity was 4 percent in 2008, but it is now lower than 2 percent.
"We need investments in oil-producing countries if we don't want to see tightening," Birol said, and added, "World crude stocks are in decline. With OPEC’s plan, stocks will continue to withdraw."
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