More than a trillion dollars in annual investments to find new fossil fuels will be needed for the next two decades to avoid an energy crisis that could choke the global economy, the International Energy Agency said Wednesday.
The warning from the Paris-based agency comes at a time when major oil companies are pulling back investments during one of the most severe economic downturns in a generation. The IEA stressed that it's vital for the world's energy companies to continue investing in new projects despite the current economic malaise. The total potential tab through 2030: $26.3 trillion.
"While the situation facing the world is critical, it is vital we keep our eye on the medium- to long-term target of a sustainable energy future," IEA Executive Director Nobuo Tanaka told reporters at the release of its annual World Energy Outlook report in London.
There are growing fears the simultaneous plunge in oil prices and a pullback in spending on exploration and production will result in another massive energy price spike.
Under pressure
"While macroeconomic conditions have lowered oil prices for the moment, there is nothing in the underlying economic picture that suggests this slowdown will be long-lived, maybe a year or more out," said former Secretary of Energy Spencer Abraham. "There was not enough production even when we were in triple-digit oil markets over the summer, and there's going to be a lot of pressure on the system when economies recover."
Tanaka said that state-run national oil companies – like those in Venezuela and Saudi Arabia – are projected to account for about 80% of the increase of both oil and natural gas production to 2030.
Future sources of oil, the cost of producing it and the price consumers will have to pay for it are extremely uncertain, the IEA said.
That type of uncertainty already is prompting companies to withhold billions of dollars of investment in new oilfield and refining projects, even though major oil companies have posted record profits this year thanks to triple-digit crude prices.
Producers and refiners, large and small, are delaying and even canceling some work as they adjust to oil prices that have fallen more than 60% since peaking in July above $147.
Another huge obstacle for the multinational oil giants like Shell and Exxon Mobil Corp. is gaining access to potential new sources of fossil fuels. State-run oil companies control about 80 percent of global oil reserves and, for now, are keeping a tight grip on their assets.
"Even (in the United States) we're limiting access," said Mary Novak, an energy analyst at IHS Global Insight. "The $20 trillion figure sounds good, but who's going to spend it and where are they going to spend it is the biggest problem."
The IEA expects demand for oil to rise from 85 million barrels per day currently to 106 million barrels per day in 2030 – 10 million barrels per day less than projected last year.
The IEA is a policy adviser to 28 member countries, mostly industrialized oil consumer.