NEW DELHI: International Energy Agency said on Wednesday that global oil demand will not peak in the near future and India’s vulnerability to high prices will increase with surge in its crude oil imports.
Oil demand will continue to grow stronger this year, at about 1.5 million barrels per day, driven by petrochemicals and other sectors, IEA Executive Director Fatih Birol said.
“We are not going to see peak in oil demand very soon. I am now worried that we don’t have enough investment to meet oil demand growth,” he told reporters on the sideline of the 16th International Energy Forum here.
He said price spike is not good for anybody, especially India, where the economy is heavily dependent on oil imports.
Very high prices are not good for oil producers either as it can create serious challenges for them, Birol said.
“Indian oil imports will grow more and more driven by transportation, petrochemicals and other sectors. Indian economy’s vulnerability to international oil price will also increase. Some oil producing countries may have short term gain from very high prices; in medium and longer term, it is not good for sustainability of their economies,” he said.
Talking about single product (crude oil) producing countries, he said they should not be vulnerable to oil prices because if they crash their economies may well face serious challenges.
He pointed to flow of shale oil and gas in the markets and advance technologies like renewables to electric cars which may affect oil prices across the world.
The global oil market dynamics have changed substantially, he said, adding that if there is another price hike there will be a strong response from US shale oil production as also from Brazil and other developing countries.
Birol said: “We have seen first way of shale oil coming to markets….lower prices…but prices picked up . I am going to see second wave of shale oil coming. So the established producers push up price, we will see the response now coming from unconventional oil from US, Brazil and elsewhere. So it will put downward pressure on prices as a result of growing oil production from different countries.”
On renewables, he said it is mainly solar PVs which are getting cheaper and cheaper and as such many people are using solar.
“Renewables are mainly used for electricity generation but we use energy in many other thing-industry and homes. We think while the renewables will grow strongly, we will still need oil and gas for many years to come. Countries like India need to look after their oil and gas security as well as their effort for upliftment of economy.”
He was of the view that India is an important country and its economic growth which is one of the bright spots of global economy today, is linked to energy prices especially oil and gas.
In that respect it is very important for India economy and global economy that we don’t see price spikes, he added.
He also said,”We are seeing some surprises in oil and gas markets. Shale oil is growing very strongly. In the next five year, about two third of global oil demand would be met only by US oil production. This is definitely a game changer. Established oil producers will like to see a different picture in the oil markets but US is coming very strongly, so is Canada, Brazil and Norway among other countries.”
He also talked about challenges such as decline in oil output in mature fields and low investment in oil and gas exploration which may lead to crude price surge by established players.