Spare oil capacity seen to tighten again
Reuters
First Posted 16:37:00 08/27/2008
Filed Under: Economy, Business & Finance
STAVANGER, Norway -- The world's spare oil output capacity will tighten from 2013 due to an expected growth in demand after expanding towards 2010, the head of the International Energy Agency (IEA) said Wednesday.
"There will again be a less spare capacity from 2013, meaning oil prices are not likely to return to levels from a few years ago any time soon," said Nobuo Tanaka, the executive director of the IEA, the energy advisor for the world's most industrialized nations told an oil and gas conference.
Tanaka told Reuters in an interview Tuesday that spare capacity would rise to four million barrels per day in 2008 from two million bpd now and new projects would come onstream.
With spare capacity thinning again, oil prices could then spike on potential supply disruptions caused by factors as diverse as hurricanes or geopolitical conflicts, he said.
Oil prices rose sharply in the first half of this year to strike a record high above $147 a barrel in July. They have since fallen to around $117 as demand in many developed countries weakened.
Tanaka said even at current levels prices were still high and harmful to the global economy, especially emerging markets.
He also said oil output from countries outside the Organization of the Petroleum Exporting Countries (OPEC) was likely to peak in the next decade.
"Non-OPEC output is expected to peak by the middle of the next decade. Production will be increasingly dominated by a small number of major producers," Tanaka told conference delegates.
Although suppliers tend to be criticized for high oil prices, Tanaka reiterated his view that consumers should continue to conserve energy further and fuel subsidies in such countries as China should be lifted.
The IEA says such subsidies create unnatural oil demand growth as they prevent the market mechanism of high global prices denting demand.
"Unless government policy changes, world energy demand will grow by 55 percent by 2030. Despite all the attention given to wind, bio, solar, the reality is we are still heading for a fossil future -- 84 percent of the overall increase will come from oil, gas, and coal," Tanaka said.
The IEA estimates oil subsidies in China, India and the Middle East totaled $70 billion in 2006 and are even greater now, he said.
Tanaka also said an objective to cut emissions of carbon dioxide, a major greenhouse gas, by 50 percent, a target pledged by the leaders of the G8 nations to fight with global worming, would be achievable but extremely tough.
About $45 trillion of investment, or roughly 1.0 percent of the world's gross domestic product, would be necessary to achieve the target, including building 17,000 large wind power turbines and 32 nuclear power plants every year between now and 2050, he said.
Carbon capture and storage technology will be crucial and it is urgent that new plants be built soon.
He said the price of carbon dioxide would have to be at least $50 a ton to de-carbonize the power sector.
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