Oil demand to rise for 25 years despite green push: IEA

Richard Lein Yahoo News 9 Nov 10;

PARIS (AFP) – Oil demand and price are set to grow strongly over the next 25 years despite environmental policies, essentially dooming climate-change goals, the International Energy Agency forecast on Tuesday.

Slightly more than a third of the new demand would come from China's appetite for energy.

"The age of cheap oil is over, though policy actions could bring lower international prices than would be otherwise the case," said IEA chief economist Fatih Birol at a London news conference.

The IEA, the energy monitoring and strategy arm of the Organisation for Economic Cooperation and Development, forecast the price of crude oil to increase 88 percent by 2035 to 113 dollars a barrel in inflation adjusted dollars, in its latest World Energy Outlook report.

Under the calculations which take into climate change pledges made under the Copenhagen Accord last year, fossil fuels will still account for more than half the increase in total energy demand, with oil to remain the dominant fuel.

The broad failure of the Copenhagen summit on the climate would cost the world 1,000 billion dollars (716.3 billion euros) in extra investments needed by 2030 to avoid irreparable damage to the climate, raising the total investment needed to 11,600 billion dollars, the IEA estimated.

It forecast demand for oil to rise by 18 percent between 2009 and 2035, driven by developing countries, with nearly half the increase accounted for by China alone.

Global demand for oil would total 99.0 million barrels per day in 2035, or 15.0 million barrels per day more than in 2009, and all of the increase would come from outside the OECD area of advanced economies.

Demand for natural gas should increase by 44 percent to 4.5 trillion cubic metres, also largely driven by demand from China.

The IEA concluded that this "rising demand for fossil fuels would continue to drive up energy-related carbon dioxide emissions ... (and) make it all but impossible to achieve the two degree C goal..."

The Copenhagen Accord sets a non-binding target of a two degrees Celsius increase in the global average temperature from pre-industrial changes, a level scientists believe is needed in order to prevent the most damaging climate change.

The IEA said government commitments made at Copenhagen "fall short" of what is needed to get to the two degree C target, and the forecast increases in energy consumption would likely result in an increase of 3.5 degrees C.

In particular, the IEA noted that increasing demand would force oil companies to unconventional sources, such as oil sands and shale, which are not only costly and will drive up prices, but which also generally emit more greenhouse gases.

However, the IEA said that the commitment last year by Group of 20 industrialised and emerging market countries to rationalise and phase out inefficient fossil fuel subsidies "has the potential to, at least partly, balance the disappointment at Copenhagen."

It added that removing the subsidies which cost governments a hefty 312 billion dollars last year, "could make a big contribution to to meeting energy-security and environmental goals, including mitigating carbon dioxide and other emissions."

The IEA said such measures would be a "crucial pillar" to meeting climate goals along with carbon pricing and abatement measures in developed economies.

The delay in tackling climate change is also driving up the cost, with the IEA estimating efforts needed to reach climate targets now would shave 1.9 percent off global GDP in 2030, more than double its estimate last year of 0.9 percent.

"The message is clear, we must act now to ensure that climat commitments are interpreted in the strongest way possible and that much stronger commitments are adopted and taken up after 2020, if not before...," said IEA Executive Director Nobuo Tanaka.

The IEA report also emphasised the rising importance of developing countries in the energy market, expecting for them to account for 93 percent of the growth in energy demand over the next quarter century under Copenhagen pledges.

China alone is expected to account for 36 percent of the projected growth.

"It is hard to overstate the growing importance of China in global energy markets," said the IEA.

China's energy consumption more than doubled from 2000 to 2008 to overtake that of the United States, and the agency believes that prospects for future growth remain strong as its per-capita consumption level remains at only one-third the average for industrialised nations.

The IEA said China could bring about a "golden age for gas" with demand forecast to grow by an average of six percent per year, or a fifth in the overall increase in demand.

Chinese demand for gas could grow even faster if Beijing restrains use of coal for environmental reasons, it noted.

OPEC is also projected to thrive despite Copenhagen climate policies, increasing its share of global oil output to more than half.

Saudi Arabia is expected to reclaim the title of top producer from Russia with its output rising to 14.6 million barrels per day in 2035 from 9.6 million last year.