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Crude oil demand won’t peak anytime soon, the head of the International Energy Agency Fatih Birol said, adding that growth will be spurred by emerging economies.
Reuters quoted Birol as saying that, “We do not see in the near and medium terms oil products can be substituted by other fuels. More than one third of growth comes from trucks in developing Asia.”
Birol is not the first industry insider or observer to pin the hopes of the oil industry on emerging nations, and for good reason: while developed economies in Europe are firmly on the path to renewable energy, emerging economies simply cannot afford such a shift in their energy mix so quickly, although efforts to reduce the reliance on fossil fuels are being made there as well.
Birol, speaking at GE’s Oil and Gas Annual Meeting in Italy, also warned that oil markets are in for further volatility because of the lack of new upstream investments, brought about by the 2014 oil price crash. He suggested the current volatility will intensify unless this year some large-scale new oil projects are announced to quench worries about a future deficit of the fuel.
Markets are already excessively volatile, but the main concern right now seems to still be about the global glut that OPEC and 11 non-OPEC producers agreed to address by cutting daily production.
Earlier this month, Birol was quoted as saying that OPEC’s efforts will pay off and prices will stabilize, driving higher production, which will serve to increase volatility by curbing demand. The higher production refers to the U.S. shale patch, where E&Ps are already pumping more. Further, Birol said at the time, China might also start increasing its domestic output as demand is rising and so is the country’s dependence on imported crude.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.