11 Nov 2015

Low oil prices forecast to last for years

1:18 pm on 11 November 2015

The Paris-based International Energy Agency (IEA) is forecasting oil prices to stay low for many years.

International Energy Agency Executive Director, Fatih Birol.

International Energy Agency Executive Director, Fatih Birol. Photo: AFP

Brent Crude costs about $US47 a barrel, well under half what it was 18 months ago.

The agency, of which New Zealand is a member, says under one middling scenario, oil will rise to only $US80 a barrel by 2020, and other scenarios suggest it could stay lower for much longer.

Continued low prices could have a negative impact on the environment, because 15 percent of energy savings are lost in a low oil price scenario, the agency says.

Middle Eastern oil producers could be restored to a dominant position they had not had since the 1970s, because low prices favour low-cost production in desert environments over high-cost drilling in difficult conditions such as oceans or forested hills. That development could increase worries about energy security.

The report says overall energy use will rise by one third by 2040 but this will occur entirely in non OECD countries.

By 2040, China's net oil imports will be nearly five times those of the United States, while India's will easily surpass those of the European Union, the agency said.

IEA executive director Fatih Birol said now was not the time to relax. "Quite the opposite: a period of low oil prices is the moment to reinforce our capacity to deal with future energy security threats," he said.

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