Wednesday, July 1, 2009

IEA on Oil and Gas

In the news recently: the International Energy Agency on fossil fuel supply and demand.

According to the press release regarding the launch of its two new publications, Medium-Term Oil Market Report 2009 and the Natural Gas Report 2009, the IEA forecasts lower growth in oil demand between now and 2014, perhaps to the tune of 3 million barrels a day less. Still, those certain that this means the end of all those pesky "peak oil" worries should not get too excited yet, because as they note themselves "It may be too early to cite a definitive structural downshift in oil use." Additionally, even if they see hints it will occur in GM and Chrysler filing for bankruptcy and "further rationalisation affecting transport and power generation fuel use," growth demand in Asia and the Middle East will eclipse cutbacks in the developed (OECD) states by 2014.

More ominously, they see less supply growth happening-just 4 million barrels a day by 2014, almost 30 percent less than they guessed in December, and note that "Supply could be lower still were upstream spending curbs to extend beyond 2009." Additionally, that 4 million barrels counts in biofuel growth (they see it doubling from 1.5 to 3 million barrels a day between 2008 and 2014), and from OPEC-rather than the non-OPEC countries to which those pinning geopolitical hopes on a "diversification of oil sources" so often look. Still, the release takes the position that the tightness will be due not to resource scarcity, but "above-ground" obstacles to exploitation.

The gas situation is unprecedented in at least one way: the IEA is predicting the first drop in natural gas demand in fifty years during 2009.

Additionally, given the impact of economic uncertainty on the infrastructure/investment side of the market, notes "a risk in the medium term of tightening markets when demand recovers."

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