IEA warns low prices to harm energy security

A long period of lower oil would trigger energy-security concerns by heightening the reliance on a small number of low-cost producers or risk a sharp rebound in price if investment fell short, said the International Energy Agency (IEA) in its latest world energy outlook on Tuesday.

If oil prices stayed at current levels for decades, reliance on Middle East oil would get back to 1970s level, as prices would push out higher-cost sources of supply, the report found.

Lower prices could undercut essential policy support for the energy transition, which meant 15 percent of efficiency savings were lost, it added.

"It would be a grave mistake to index our attention to energy security to changes in the oil price," said IEA executive director Fatih Birol. "Now is 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."

The report found that a tightening oil balance will lead to a price around 80 U.S. dollars per barrel by 2020, as the plunge in oil prices had "set in motion the forces that lead the market to rebalance" via higher demand and lower growth in supply.

Asia is the leading demand center for every major element of the world's energy mix in 2040. By 2040, China's net oil imports will be nearly five times those of the United States, while India's will easily exceed those of the European Union, it said.

The report found that the links between global economic growth, energy demand and energy-related emissions weakened. It said China's transition to more diversified and much less energy-intensive model for growth reshaped energy markets. Endit