Oil prices hit a record high in 2006 partly because of lack of adequate spare capacity, which brings to fore the issue of investment to increase production in the future, Guy F. Caruso, Administrator, Energy Information Administration (EIA), said in Dubai on Saturday.
Speaking at the release of the Arabic translation of the International Energy Outlook 2006 (IEO 2006) at the Gulf Research Center, the US Department of Energy official added that spare capacity in the region has been as low in the last three years as it has been in the last 35 years with the exception of the period immediately after the invasion of Kuwait.
The IEO 2006 forecasts that inflation-adjusted oil prices will hover between $34 and $96 per barrel until 2030. “Given the current pace of investment in the upstream activities, our reassessed reference price of $50 per barrel is sustainable,” the official explained. The report expects prices to increase by 1.2 per cent annually until 2030, with a gradual retreat in oil prices in 2006 and a further decline to $47 per barrel by 2014.
Citing the report, Caruso said, “Developing countries will consume about three times more oil in 2030 than they are consuming today. With world oil consumption likely to grow from 85 million barrels per day (mbpd) to 118 mbpd in 25 years, developing countries are likely to consume about 60 mbpd.”
This, according to the administrator, guarantees the security of demand for the Middle Eastern countries, which have about 60 percent of the world’s oil reserves and currently produce about 25 million barrels of day. “The Middle East can also feel secure that despite talk of non-conventional energy sources, its share will be only 12 mbpd in 2030,” he said.
According to GRC Chairman Abdulaziz Sager, “The IEO 2006 covers international energy projections through 2030, including outlooks for major energy fuels and associated carbon dioxide emissions. It aims at helping energy managers and analysts, both in the government and in the private sector, by providing them state-of-the-art projections and the most recent available data.”
By translating the IEO into Arabic and publishing it for the second consecutive time, the GRC aims to make an important contribution to the understanding of the world trends in energy demand and the major macroeconomic assumptions to the Arab world.
Through the Arabic version of the IEO 2006, the Arab world can also gain access to information on regional projections of end-use energy consumption in the residential, commercial, industrial, and transportation sectors and the projections for world electricity markets, Sager added.
Aloulou Fawzi, an energy economist at the International Economic and Greenhouse Gases Division of the Office of Integrated Analysis and Forecasting at the EIA, said, “Saudi Arabia will increase its oil production from 12 to 18 mbpd, depending on prices and its own economic growth. If prices exceed $96 per barrel, Saudi Arabia will not increase its production capacity.”
Commenting on why the report had not taken into account the impact on the oil market if Iran makes good its threat of halting oil exports in case sanctions are imposed over the nuclear program row, Fawzi said, “If Iran halts its oil exports, the markets will face a shortage of about 2.8 million oil barrels a day, which will require adjustments in our forecast, but there are specific instructions from the US administration and Congress to the Energy Department to avoid political issues in the report.”