IEA’s Fatih Birol recent prediction on peak oil and future oil prices

Fatih Birol clarifies the IEA’s most recent prediction that if there are no new discoveries of oil, global oil production will peak around 2020, but only if demand grows as sharply as expected. More specifically, the IEA anticipates that non OPEC oil output will peak within the next several years, if it has not already.

Oil generated by OPEC countries, which contain huge, low-cost resources are expected to fill the gap. However, this means that such countries will have to increase their output substantially, which some of them may be unable or unwilling to do. Birol warned that underinvestment in unconventional and alternative fuels could lead to much higher oil prices, placing a heavy burden on the world economy. Thus, lower oil use would not only “contribute to meeting climate-change goals,” but would “enhance energy security and bring about long-term economic benefits.

“I think it is important to bear in mind that peak oil is not just about supply; it implies a peak in demand too. Price is the key that will balance both. It is our view that higher prices will be needed to allow supply to rise as we need to exploit more difficult and costly resources; we assume that the average crude oil price reaches $115 per barrel in today’s money by 2030 in our Reference Scenario, and $190 per barrel in nominal terms.”

Tags:  Fatih Birol, IEA, OPEC, peak oil