More needs to be done to avoid oil spike, IEA says

[November 09, 2010]  LONDON (AP) -- Governments need to do more to increase efficiency and boost green technologies to avoid a spike in oil prices as energy demand is expected to jump 36 percent through 2035, the International Energy Agency warned Tuesday.

In its annual World Energy Outlook released, the Paris-based IEA said emerging nations like China will account for most of the surge in demand and that much will depend on the strength of the economic recovery over the next few years.

The agency -- the energy arm of the Organization for Economic Cooperation and Development, a grouping of the world's richest nations -- forecast that global oil demand will rise to 99 million barrels a day by 2035, some 15 million barrels a day higher than last year.

That's a slightly slower increase than the 105 million barrels a day by 2030 it forecast last year as the world economy continues to slowly get back on its feet, but IEA Executive Director Nobuo Tanaka said it was no time for policy makers to be complacent.

The report predicted that oil prices could soar as high as $135 a barrel and are expected to average $113 a barrel by 2035, compared to an average of $60 in 2009, as higher prices are needed to bring demand into balance with supply.

"Recent events have cast a veil of uncertainty over our energy future," Tanaka told reporters in London. "We need to use energy more efficiently and we need to wean ourselves off fossil fuels by adopting technologies that use a much smaller carbon footprint."

Tanaka said the Copenhagen Accord on tackling global warming and an agreement among G-20 countries to phase out subsidies are positive steps but more needs to be done to use energy more efficiently.

Nations meeting in Copenhagen last year pledged varying reductions to their carbon emissions by 2020 -- ranging from 17 percent for countries including the United States and Canada to 45 percent for China.

"Whether or not these countries fulfill their targets is a big question," said IEA Chief Economist Fatih Birol. "We consider Copenhagen to be a failure ... some of the pledges are very vague."

The IEA's primary forecast for a 36 percent rise in energy demand assumes that government policy commitments will be met, an assumption that makes a significant difference to energy trends. While demand grew 2 percent annually over the 27 years to 2008, it will average 1.2 percent from 2008 to 2035.

The IEA -- a policy adviser to 28 member countries, mostly industrialized oil consumers -- expects non-OECD countries to account for 93 percent of the projected increase in world primary energy demand.

China, which IEA preliminary data suggests overtook the United States in 2009 to become the world's largest energy user despite its low per capita energy use, will contribute 36 percent to the projected growth in global energy use.

"It is hard to overestimate the growing importance of China in global energy," said Tanaka. "How the country responds to the threats to global energy security and climate posed by rising fossil fuel use will have far-reaching consequences for the rest of the world."

The Organization of the Petroleum Exporting Countries, which pumps around 40 percent of the world's oil, last week forecast that world energy demand will rise by 40 percent in the next three decades even as the appetite for oil shrinks because some of the need will be met by other sources.

In its annual World Outlook, the 12-nation oil producers' bloc says that crude's role in fueling the world will fall "over time," although it will still be over 30 percent by 2040. It suggests renewables and natural gas could become increasing alternatives.

The report said that fossil fuels overall will remain dominant, satisfying 80 percent of energy needs.

The OECD report also forecast that world oil demand will grow to a daily 105.5 million barrels in 2030, an increase of 21 million barrels a day over last year.

[Associated Press; By JANE WARDELL]

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