IEA: Low oil prices could lead to energy shortages

Oil producers that aren’t members of the group are complaining as well: On Monday, Omani oil minister Mohammed Bin Hamad Al Rumhy called current oil production levels “irresponsible” and said the group had contributed to low oil prices.

US shale oil output will taper off in the early part of the next decade after peaking at about 5 million barrels a day, while crude prices recover to $80 in 2020 and keep rising, according to the agency.

In its World Energy Outlook 2015, the IEA said it forecasts tightening oil supply-demand balance under its central scenario to lead to a price of around $80/bbl by 2020.

“It would be a grave mistake to index our attention to energy security to changes in the oil price”, IEA Executive Director Fatih Birol said in a written statement.

“In the last 25 years, we have never seen two consecutive years where the investments are declining and this may well have implications for the oil market in the years to come”.

Oil companies have grappled with the downturn and a “lower for longer” price outlook by slashing spending, cutting thousands of jobs and delaying around $200 billion in mega-projects around the world. The IEA believes India will import 90 percent of its oil by 2014, as its production “falls well behind the growth in demand”.

Unable to break-even at the lower price of oil, many United States producers have either cut back on production or closed rigs entirely, showing that the OPEC strategy could be working.

Iran and Iraq will lead an expansion of OPEC’s production in the years ahead as growth stalls in non-OPEC countries.

India will be the chief driver of rising demand, where the IEA expects consumption to increase more than anywhere else, hitting 10 million bpd by 2040.

Production growth from countries outside OPEC will slow over the next five years – predicted to a point less than a third of the rate recorded from 2010 to 2015.

Whereas last June a barrel of oil cost $114, today the price is under $50 a barrel amid a glut in supply and a lack of demand.

But if prices remain low, higher-cost suppliers will be pushed out of the market, leading to over-reliance on lower-cost Middle East oil exports that could “eventually escalate to a level last seen in the 1970s”.

But the IEA warned low oil prices trigger security concerns, as well as the risk of a sharp rebound in oil prices due to under investment.