News / Economy

    Large Spike in World Oil Prices Could Come in a Few Years

    FILE - World oil prices are likely to remain relatively low over the next year, but a new report predicts a big increase after that.
    FILE - World oil prices are likely to remain relatively low over the next year, but a new report predicts a big increase after that.

    Related Articles

    Oil, Stock Prices Rise Monday

    Investors were reacting to reports that number of active US oil rigs declined — fewer rigs could mean lower supplies and higher prices — according to financial press

    World oil prices are likely to remain relatively low over the next year, but a new medium-term market report from the International Energy Agency (IEA) — the world's oil consumer body — predicts a big increase after that, with prices at around $80 a barrel, double what they are now.

    The report’s authors say the downturn in prices over the past year-and-a-half led to a downturn in investment, which undermines producers' ability to ramp up production again when demand increases.

    Speaking at an annual energy industry conference in Houston, IEA Executive Director Fatih Birol said demand is still weak and supplies remain large, but cutbacks in production are beginning to have an impact.

    "Global oil supply growth is plunging and seriously," he said. "At this same period of time in the last six years, it was about 11 million barrels per day and it is now four million barrels per day as a result of low prices."

    Market shock

    Birol said there have also been cutbacks in investment in new projects, which he said will eventually create a market shock, not simply because demand for oil will increase in coming years, but because of the need to compensate for declining production from existing fields.

    FILE - A general view shows oil pumping jacks and drilling pads at the Kern River Oil Field, where the principle operator is the Chevron Corporation, in Bakersfield, California, July 28, 2015.
    FILE - A general view shows oil pumping jacks and drilling pads at the Kern River Oil Field, where the principle operator is the Chevron Corporation, in Bakersfield, California, July 28, 2015.

    "Even if there is zero growth in demand," he said, "every year we have to produce three million barrels a day in order to stay where we are today."

    In the oil and gas industry, plans for new fields often take years to develop and implement, and the incentive to invest heavily is undermined by lower prices. The current slump has hit many oil-producing countries hard, especially poorer nations that rely on oil revenues to support social programs.

    In the United States, private companies in the energy sector have been cutting back production, investments and jobs. Thousands of workers have been laid off in recent months in Texas, North Dakota, Louisiana, Oklahoma and other oil-rich states.

    Economic growth

    A slowdown in China's economic growth is one of the reason economists have cited for the drop in world oil prices. China, however, remains focused on meeting its future energy needs.

    Birol said China is committed to its energy security and maintains healthy reserve supplies. He said there has also been a noticeable shift of oil trade lines in recent years, with the link between Middle East oil producers and Asia growing stronger.

    FILE - A security guard keeps watch over oil pipelines in Aramco refinery in Saudi Arabia in September 1990.
    FILE - A security guard keeps watch over oil pipelines in Aramco refinery in Saudi Arabia in September 1990.

    The IEA director said increasing economic growth in China and elsewhere in the years ahead will boost oil demand, but he said a return to the $100-a-barrel level of mid-2014 is unlikely. He said the spike that he sees to around $80 a barrel will also be temporary, as oil demand will be tempered by increases in energy-use efficiency and the development of renewable energy sources.

    U.S. production increase

    The IEA's Neil Atkinson, who edited the market report, said he was surprised by both the rapid increase in U.S. production resulting from technological advances applied in shale fields and by the resiliency of the U.S. producers as prices fell.

    "Nobody saw, amongst other things, the shale oil phenomenon in the United States coming and we were expecting a very different world,” he said. “We are now in a world where production is growing very strongly. It is having a halt at the moment because of the economics, but that will come back."

    Atkinson said that if the United States starts exporting oil, it would likely have little impact on the global market partly because the amount would be relatively small. The United States is still a net importer of oil, so most of its production would stay at home.

    The IEA market report shows that the Middle Eastern region remains the largest source of oil for the world market, and the decision by countries in that region to maintain production levels in the past year contributed to the drop in prices.

    Russia and Saudi Arabia last week announced a plan to limit production in order to stabilize prices, but Birol said he expected that to have limited impact since the limit set is already higher than what Russia is currently producing. He also noted that the lifting of sanctions on Iran will allow that petroleum-rich Persian Gulf country to export more in the coming months, further bolstering world supply.

    You May Like

    US Internet Giants, EU Reach Deal to Combat Online Hate Speech

    Facebook, Twitter, Google and Microsoft commit to ‘quickly and efficiently’ act to clamp down on use of social media to incite violence, terror

    Video Tunisia’s Ennahda Party Begins a New Political Chapter

    Party now moves to separate its political and religious activities; change described by party members as pragmatic response to political and economic challenges facing Tunisia today

    Virtual Reality Fine-tuned at Asia Tech Show

    Microchip designers hope to improve resolution for users of systems that can turn your bedroom into the ocean floor

    This forum has been closed.
    Comments
         
    There are no comments in this forum. Be first and add one

    Featured Videos

    Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
    Tech Startups Showcase Wares at Amsterdam Conferencei
    X
    Serginho Roosblad
    May 30, 2016 5:11 PM
    More than 20,000 tech enthusiasts, entrepreneurs and lovers of digital technology came together in Amsterdam recently at the Next Web Conference to discuss the latest developments in digital technology, look to the future and, of course, to connect. In recent years, there has been an explosion of so-called startup businesses that have created devices and applications that have changed the way we live; but, as Serginho Roosblad reports for VOA, there are pitfalls for such startups as well.
    Video

    Video Tech Startups Showcase Wares at Amsterdam Conference

    More than 20,000 tech enthusiasts, entrepreneurs and lovers of digital technology came together in Amsterdam recently at the Next Web Conference to discuss the latest developments in digital technology, look to the future and, of course, to connect. In recent years, there has been an explosion of so-called startup businesses that have created devices and applications that have changed the way we live; but, as Serginho Roosblad reports for VOA, there are pitfalls for such startups as well.
    Video

    Video US Military's Fallen Honored With Flags

    Memorial Day is a long weekend for most Americans. For some, it is the unofficial start of summer -- local swimming pools open and outdoor grilling season begins. But Memorial Day remains true to its origins -- a day to remember the U.S. military's fallen.
    Video

    Video Rolling Thunder Rolls Into Washington

    The Rolling Thunder caravan of motorcycles rolled into Washington Sunday, to support the U.S. military on the country's Memorial Day weekend
    Video

    Video A New Reading Program Pairs Kids with Dogs

    Dogs, it is said, are man's best friend. What some researchers have discovered is that they can also be a friend to a struggling reader. A group called Intermountain Therapy Animals trains dogs to help all kinds of kids with reading problems — from those with special needs to those for whom English is a second language. Faiza Elmasry has more on the New York chapter of R.E.A.D., or Reading Education Assistance Dogs, in this piece narrated by Faith Lapidus.
    Video

    Video Fan Base Grows for Fictional Wyoming Sheriff Longmire

    Around the world, the most enduring symbol of the U.S. is that of the cowboy. A very small percentage of Americans live in Western rural areas, and fewer still are cowboys. But the fascination with the American West is kept alive by such cultural offerings as “Longmire,” a series of books and TV episodes about a fictional Wyoming sheriff. VOA’s Greg Flakus recently spoke with Longmire’s creator, Craig Johnson, and filed this report from Houston.
    Video

    Video Chinese-Americans Heart Trump, Bucking National Trend

    A new study conducted by three Asian-American organizations shows there are three times as many Democrats as there are Republicans among Asian-American voters, and they favor Hillary Clinton over Donald Trump. But one group, called Chinese-Americans For Trump, is going against the tide and strongly supports the business tycoon. VOA’s Elizabeth Lee caught up with them at a Trump rally and reports from Anaheim, California.
    Video

    Video Reactions to Trump's Success Polarized Abroad

    What seemed impossible less than a year ago is now almost a certainty. New York real estate mogul Donald Trump has won the number of delegates needed to secure the Republican presidential nomination. The prospect has sparked as much controversy abroad as it has in the United States. Zlatica Hoke has more.
    Video

    Video Drawings by Children in Hiroshima Show Hope and Peace

    On Friday, President Barack Obama will visit Hiroshima, Japan, the first American president to do so while in office. In August 1945, the United States dropped an atomic bomb on the city to force Japan's surrender in World War II. Although their city lay in ruins, some Hiroshima schoolchildren drew pictures of hope and peace. The former students and their drawings are now part of a documentary called “Pictures from a Hiroshima Schoolyard.” VOA's Deborah Block has the story.
    Video

    Video Vietnamese Rapper Performs for Obama

    A prominent young Vietnamese artist told President Obama said she faced roadblocks as a woman rapper, and asked the president about government support for the arts. He asked her to rap, and he even offered to provide a base beat for her. Watch what happened.
    Video

    Video Roots Run Deep for Tunisia's Dwindling Jewish Community

    This week, hundreds of Jewish pilgrims are defying terrorist threats to celebrate an ancient religious festival on the Tunisian island of Djerba. The festivities cast a spotlight on North Africa's once-vibrant Jewish population that has all but died out in recent decades. Despite rising threats of militant Islam and the country's battered economy, one of the Arab world's last Jewish communities is staying put and nurturing a new generation. VOA’s Lisa Bryant reports.

    Special Report

    Adrift The Invisible African Diaspora

    World Currencies

    EUR
    USD
    0.8977
    JPY
    USD
    111.18
    GBP
    USD
    0.6834
    CAD
    USD
    1.3038
    INR
    USD
    67.139

    Rates may not be current.