Global oil demand may fall in 2009 if the economies of developing countries slow further, the head of the International Energy Agency said on Monday.
An absolute fall in global demand would be the first for decades but appears increasingly possible as motorists desert their cars and industrial output plummets. Asked if global oil demand could drop in 2009, IEA chief Nobuo Tanaka said: “It’s possible. If the big non-OECD economies like China or India decline further, that is possible.” “Especially in the OECD countries the decline is clear and is getting sharper and sharper.
In non-OECD economies like China, India and the Middle East, the oil demand is robust,” he added on the fringe of UN climate talks in the western Polish city of Poznan. In the latest in a series of downward revisions, the IEA last week cut forecast growth in global oil demand to about 220,000 barrels per day (bpd) higher than 2008 levels -- far below recent trends of an around 1 million bpd annual increase. “Financial conditions are nothing short of critical,” Tanaka said on Monday.
Worldwide demand will decline by 20,000 bpd in both 2008 and 2009, according to a Reuters poll of 11 analysts, banks and industry groups last month to view a table of the forecasts) About 190 countries are meeting in Poznan to review progress toward a new climate treaty meant to be agreed in Copenhagen at the end of next year.
Tanaka would not comment directly on a preferable oil price. “The problem is not how low or high the oil goes. It’s the volatility that is the problem,” he told Reuters. He said both the July peak of $147.27 a barrel as well as the current price of slightly above $40 were wrong. “But if there was a sudden increase of stock and capacity building the market would be able to absorb this speculation and volatility,” he said. Oil prices have fallen more than $100 a barrel since reaching a record high of $147.27 a barrel in July, dragged lower by the gloomy economic outlook and weakening oil demand.
US crude traded as low as $40.8 a barrel on Monday before rallying to around $44. “But the era of the cheap oil in the longer term is over,” Tanaka said. “The demand-supply structure will drive us up with prices in the future and that’s unavoidable.” Under IEA’s business-as-usual scenario oil would rebound to $120 per barrel in 2030 or stay on the average annual level of around $100 if countries take on ambitious greenhouse gas reduction goals.
Tanaka said the single most important technology to help fight climate change was carbon capture and storage. “How to deal with the coal power plant in a developing country -- that’s the question. Carbon capture and storage is the only way to get China or India into the process of fighting climate change.” (Reuters)