Falling global oil prices may be good for consumers, but pose new challenges for America’s producers, according to a new global energy survey issued this week by the International Energy Agency.
On the heels of the U.S. and China’s joint announcement on climate change and clean energy cooperation, the World Energy Outlook 2014 outlined the sector’s role in climate change, the future of gas prices and the change in the world’s energy use through 2040, with shifts that could threaten the competitiveness of the booming U.S. energy sector. Much of the country’s fracking boom took place when oil prices topped $100 a barrel — more than $20 higher than today’s market prices. The U.S. may have to take on even more debt in the future, Fatih Birol, chief economist at IEA, and projects on the drawing board may never come to fruition.
“If the [oil] prices continue to stay down, I would think that some of the companies may give a second look at their investment plans in North America, including the United States,” Mr. Birol said.
The lower prices could also have a major impact on more unconventional — and expensive — moves to obtain oil, including projects to drill for oil in the Arctic and more challenging offshore sites.
Mr. Birol warned of possible troubles ahead if oil prices continue to stay low for the next couple of years, which he predicts they could.
“Oil market prices are going down today, but this calm in the oil markets should not disguise the … challenges we have in front of us,” Mr. Birol said. “We are seeing a boom in oil prices falling, but we should put that in perspective.”
Global oil demand is projected in the report to increase by 14 million barrels a day by 2040 due to increased oil use for transportation and petrochemicals. An increase in the number of hybrid cars being driven could lower that projection, but Mr. Birol said the hybrid market faces challenges of its own.
The IEA also projected a doubling in international power use by the year 2040, even though the power-generating industry is set to undergo some profound shifts in the decades ahead.
“A big chunk of the existing power plants are going to retire,” Mr. Birol said. “Power plants are like human beings. They are very strong. There is a lot of energy, but when they come to a certain level, they retire and are out of the system.”
The IEA report predicts that new power plants coming on line will be more efficient and will be able to use renewable energy due to technological innovation. About 7,000 power plants are located in the United States at the end of 2013, according to the U.S. Energy Information Administration.
While the report predicts increased energy use, it also noted the a half-billion people in the world will likely still not have access to energy by 2040.
• Mark Pace can be reached at mpace@washingtontimes.com.
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