Low prices should give no cause for complacency on energy security, IEA says
An extended period of lower oil prices would benefit consumers but would trigger energy-security concerns by heightening reliance on a small number of low-cost producers, or risk a sharp rebound in price if investment falls short, says the International Energy Agency (IEA) in the 2015 edition of its flagship World Energy Outlook publication (WEO-2015).
The report finds that the plunge in oil prices has set in motion the forces that lead the market to rebalance, via higher demand and lower growth in supply, although the adjustment mechanism in oil markets is rarely a smooth one. In the central scenario of WEO‑2015, a tightening oil balance leads to a price around $80 per barrel by 2020. But WEO-2015 also examines the conditions under which prices could stay lower for much longer. Since prices at today’s levels push out higher-cost sources of supply, such a scenario depends heavily on the world’s lower-cost producers: reliance on Middle East oil exports eventually escalates to a level last seen in the 1970s. ….