A successful effort to limit global warming through cuts in carbon emissions will slow global consumption of oil.
Carbon cuts 'will curtail oil price'
A successful effort to limit global warming through cuts in carbon emissions will slow global consumption of oil and hold down crude prices over the next two decades, the International Energy Agency (IEA) says. Oil prices in 2020 would be US$90 a barrel under a scenario in which the rise in global temperatures is limited to 2°C, the IEA, a group of 28 energy importing nations based in Paris, said in a forecast released yesterday. Under a business-as-usual scenario in which no action is taken, prices would average $100 a barrel.
Lower prices and slower growth in oil consumption translate into a US$4 trillion (Dh14.69 trillion) reduction in oil export earnings by OPEC countries compared with the reference case. "Cumulative OPEC oil-export revenues in 2008-2030 are 16 per cent less than in the reference scenario, but are still four times their level in real terms of the previous 23 years," the IEA said. The IEA issued its analysis one month before world leaders gather in Copenhagen to hammer out a new climate change treaty. The forecast argues that all countries, including OPEC members, would ultimately benefit from supporting such an agreement.
The silver lining for OPEC countries is a reduced investment burden in new oil projects: member states will need to increase output by 11.4 million barrels per day (bpd) under the scenario in which emissions are cut, compared with an increase of 17.5 million bpd under the reference scenario. Much of that new capacity will replace declines in output from older fields in the West. "The economics of OPEC production are little affected by the change in oil prices," said the IEA, noting OPEC's market share would increase to 55 per cent compared with 44 per cent today.
Under the scenario in which a climate treaty is adopted, supply from OPEC nations will still increase by a faster rate than the period since 1980, the IEA said. The lower burden on OPEC stems from reduced demand, as oil consumption is forecast to rise an average of 0.2 per cent under a climate change treaty, compared with 1 per cent in the reference case. The bulk of the reduction will come from advances in the transport sector, including greater use of electric cars and improved engine efficiency.
Overall, global oil demand will rise by only 6 million bpd from current levels to 91 million bpd by 2030, the IEA said. In a business-as-usual case, consumption that year reaches 105 million bpd. New demand will come from developing nations such as China and India as consumption in industrialised countries is expected to fall by 17 per cent. The IEA forecast was timed to push leaders to come to an agreement in Copenhagen as negotiators attempt to convince reluctant politicians in the US and elsewhere that benefits from an expensive shift away from fossil fuels outweigh the costs.
"A deal at Copenhagen is vital," said Nobuo Tanaka, the executive director of he IEA, at the launch of its annual World Energy Outlook. "Governments must reach clear agreements to improve efficiency and develop alternative forms of energy, including nuclear, which do not emit so much greenhouse gas." In the agency scenario, China would reduce emissions by 1 gigatonne, placing the country "at the forefront of global efforts to combat climate change".
The report warned that for each year of delay in implementing a treaty, the world would need to spend an additional $500 billion to cut emissions. The economic crisis has bought negotiators a little additional time: world energy demand will be 4.5 per cent lower in 2015 than was forecast last year and 1.3 per cent lower in 2030 because of the effects of the financial crisis, the IEA said. @Email:email@example.com