Oil prices could rise sharply after 2020 despite current lows because of a lack of investment in supply, according to the International Energy Agency (IEA).
In a five-year forecast, the IEA is predicting stable prices for the next three years but considerable surges after that as a supply crunch begins to take effect, caused by an investment slump in 2015-16.
The report predicts spare production capacity will fall to a 14-year low in 2022, even though supply is growing in places like the US, Canada and Brazil.
“While investments in the US shale play are picking up strongly, early indications of global spending for 2017 are not encouraging,” said the report.
Growth in consumption is accounted for almost exclusively by developing countries, and Asia will account for about seven out of every 10 extra barrels consumed globally.
By 2020 growth in India’s demand for oil will outpace that of China.
New technology such as electric vehicles, which have been hailed as a way of reducing oil consumption, will play only a very limited role in offsetting demand, the agency said.
“We are witnessing the start of a second wave of US supply growth, and its size will depend on where prices go,” said Dr Fatih Birol, the IEA’s executive director.
“But this is no time for complacency. We don’t see a peak in oil demand any time soon. And unless investments globally rebound sharply, a new period of price volatility looms on the horizon.”
The US will account for the largest amount of new supply to come on the market.
Within OPEC countries low-cost Middle Eastern producers such as Iraq, Iran, and the United Arab Emirates will increase supply while production from Nigeria, Algeria and Venezuela will decline.
Russian production is forecast to remain stable over the next five years.
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