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Page added on November 12, 2015
IEA Sees No Oil Price Rebound For Years
Oil prices are likely to stay below $80 per barrel for another five years, according to a closely watched energy report.
The International Energy Agency released its 2015 World Energy Outlook (WEO), with predictions for energy markets out to 2040. Although there are no shortage of caveats, the IEA projects that oil prices will only rebound slowly and intermittently, and the supply overhang will slowly ease through the rest of the decade. In its “central” scenario, it sees oil prices rebalancing in 2020 at $80 per barrel, with increases in the years following.
At issue, as always, is supply and demand dynamics. The IEA estimates that the oil industry will slash upstream investment by 20 percent in 2015, which will cut into long-term supply figures. Non-OPEC supply will peak before 2020 as a result of much lower investment, topping off at 55 million barrels per day.
U.S. shale will recover as prices rebound, but the IEA still sees it as a passing fad. As the sweet spots get played out in the U.S., and costs remain elevated compared to other sources of production from around the world, shale will not be around for the long haul. The IEA sees U.S. shale output plateauing in the early 2020s at 5 million barrels per day. Thereafter, it declines.
The IEA weighs a scenario in which oil prices don’t actually rebound in the medium to long-term, however. In this scenario, OPEC continues to pursue market share, U.S. shale remains resilient, and the global economy doesn’t perform as well as expected. All of that adds up to oil prices remaining at $50 per barrel through the remainder of the decade and only rising to $85 per barrel by 2040.
Of course, there is a flip side to that coin. Persistently low prices gut investment in new sources of supply, which sow the seeds for a supply shortage in the years ahead. As a result, prices could spike.
Translation: nobody knows what will happen to oil prices. So it is important to remember that the IEA merely puts forward educated guesses based on a range of assumptions.
On the demand side, the IEA sees only 900,000 barrels per day in average annual increases in demand through 2020, which is just half of the 1.8 million barrels per day in demand growth the agency expects to see in 2015.
Although it is almost not even worth looking at projections out to 2040, the IEA still expects the U.S., the EU, and Japan to slash their oil demand by a combined 10 million barrels per day over the next 25 years. That is a massive amount to be sure, but given the fact that the IEA has consistently underestimated the pace of adoption for renewables and energy efficiency, there is a good chance that it is understating the true extent to which the industrialized world will shift away from crude oil in the coming decades.
In fact, that could be the most important takeaway from the report. The IEA saysthat there are “clear signs that an energy transition is underway: renewables contributed almost half of the world’s new power generation capacity in 2014.” That is expected to continue – the IEA sees 60 cents out of every dollar spent on new electric power plants through 2040 will go to renewable energy. That spells trouble for coal, the report says. Coal accounted for 45 percent of the increase in global energy demand over the past decade, a share that drops to just 10 percent between now and 2040.
Policy is reinforcing cost trends – renewables are getting cheaper while fossil fuels are expected to become more expensive. It is inevitable that renewable energy will continue to grow and capture more market share, slowly but surely cutting out oil, gas, and coal.
“The biggest story is in the case of renewables,” IEA executive director Fatih Birolsaid when launching the report. “It is no longer a niche. Renewable energy has become a mainstream fuel, as of now.”
21 Comments on "IEA Sees No Oil Price Rebound For Years"
makati1 on Thu, 12th Nov 2015 7:02 pm
The IEA sees what it’s corporate owners want it to “see”.
“…Translation: nobody knows what will happen to oil prices. So it is important to remember that the IEA merely puts forward educated guesses based on a range of assumptions….”
And I really had to laugh at this last sentence: “Renewable energy has become a mainstream fuel, as of now.” LMAO
Too many of these ‘guesses and assumptions’ articles piled high with whatever the author is promoting this week.
Plantagenet on Thu, 12th Nov 2015 7:09 pm
Its hard to believe the oil glut will continue for another five years. Even if demand growth does slow, as the IEA predicts, oil production should slow even more, bringing an end to the oil glut.
cheers!
idontknowmyself on Thu, 12th Nov 2015 8:38 pm
The rich are now starting to lose their fake wealth:
One chart that shows how rough it’s been for Buffett’s Berkshire Hathaway
http://www.marketwatch.com/story/one-chart-that-shows-how-rough-its-been-for-buffetts-berkshire-hathaway-2015-11-12
Bill Ackman’s hedge fund posts dismal returns as Valeant craters
http://www.marketwatch.com/story/bill-ackmans-hedge-fund-posts-dismal-returns-as-valeant-craters-2015-11-12
Ted Wilson on Thu, 12th Nov 2015 8:52 pm
IEA shows lower share of Renewable energy. This is because they use the Thermal equivalence and this reduces the electric energy produced by 65%.
Just because a thermal power plant converts only 35% of the heat energy into electricity, they apply the same conversion factor and reduce the amount of electricity produced by renewable energy.
This is a clear misrepresentation which shows renewable energy in low volume.
And all their estimation of renewable energy like Solar and Wind has gone wrong. Wind energy has increased 15 fold while Solar energy has increased 180 fold in the last 14 years.
I hope they correct their stats.
Outcast_Searcher on Thu, 12th Nov 2015 9:18 pm
Ted Wilson, wind and solar combined in the US produce only 5% of the electrical energy we use at a utility scale. And of course, electrical energy doesn’t power the vast majority of the transportation, mining, steel, etc. etc. industries.
Renewable energy is in “low volume” because there still isn’t all that much of it. Green energy will increase over time — but it will take DECADES to grow into the scale of fossil fuels — likely many decades.
Outcast_Searcher on Thu, 12th Nov 2015 9:22 pm
Right Plant, and I’m not convinced of the global slowdown, given Chindia. There were 1.85 million cars sold in October in China. The growing demand for cars in China is breathtaking — I see cumulative oil demand globally continuing to grow for quite a while, even if Tesla becomes more than a niche player in the next decade.
rockman on Fri, 13th Nov 2015 6:37 am
“… the IEA still expects the U.S., the EU, and Japan to slash their oil demand by a combined 10 million barrels per day over the next 25 years. That is a massive amount to be sure”. Apparently their concept of “massive” differs a good bit from mine.
“…renewables contributed almost half of the world’s new power generation capacity in 2014.” And once again the BS “% change” hype. So with “huge” increase in renewable energy the US now gets a whopping 13% of its electricity from renewables. And the world: 19%. But both include some very old renewables…hydro. Thus a significant source of the total energy output isn’t from this new “surge” of sources. And globally almost half of that 19% is “traditional biomass”…IOW burning wood. Not exactly a GHG friendly choice. So globally where has wind and solar gotten us with this “huge” % increase: less than 1% of total energy sources. But those optimists will readily point out that wind and solar have had the greatest % gains of all the alts.
The obvious reason that so much capex is going into renewables (and I do question their number given the $billions China is spending on new coal fired plants) is that since we already have a sh*tload of fossil fuel burning sources we don’t really need to add much more. And let’s not forget the elephant in the room they ignore: fossil demand increases by China, India, et al. I guess the folks writing this fable forgot to check those IEA predictions.
And so we don’t forget: the US doesn’t really produce even that small % of wind and solar power: those come for the most part from just Texas and CA. Those two states are the primary source of alts…not the “USA”. There has been no nationwide “alt revolution”. For instance if Texas were a separate country (as it should be…LOL) it would tie with Germany as the 4th largest producer of wind energy.
shortonoil on Fri, 13th Nov 2015 7:53 am
“In its “central” scenario, it sees oil prices rebalancing in 2020 at $80 per barrel, with increases in the years following.”
The IEA is still in the “if we count enough barrels” mindset, we can come up with any future that we want mode. The price has gone down, will continue to go down over the long term, and producers will stop producing oil when they can no longer make money producing it. They still haven’t figured out that the world isn’t running out of oil; it is running out of economy. The Petroleum Production System is losing its ability to convert energy into work:
http://www.thehillsgroup.org/depletion2_022.htm
The Petroleum Production System is succumbing to the effects of its entropic decay. Like an old clock, or an old car it is simply wearing out. It takes more, and more effort to keep it going until it is just no longer worth the effort. We call that running out of money. Since this effect has happened to every human system constructed from the beginning of time; one would think they would notice? Evolution gave all of us a brain; unfortunately not all of us got one that is in working order!
http://www.thehillsgroup.org/
ghung on Fri, 13th Nov 2015 8:13 am
O_S said; “I’m not convinced of the global slowdown, given Chindia. There were 1.85 million cars sold in October in China. The growing demand for cars in China is breathtaking…”
Maybe not so much, without a little help: China’s Demand for Cars Has Slowed
“For much of the past decade, China’s auto industry seemed to be a perpetual growth machine. Annual vehicle sales on the mainland surged to 23 million units in 2014 from about 5 million in 2004. That provided a welcome bounce to Western carmakers such as Volkswagen and General Motors and fueled the rapid expansion of locally based manufacturers including BYD and Great Wall Motor. Best of all, those new Chinese buyers weren’t as price-sensitive as those in many mature markets, allowing fat profit margins along with the fast growth.
No more. Automakers in China have gone from adding extra factory shifts six years ago to running some plants at half-pace today…..
……Carmakers recently got help when China’s government, prompted by the sharp slowdown in auto sales in this year’s first three quarters, announced a tax cut on vehicle purchases from Oct. 1 through the end of 2016. China’s purchase tax on vehicles with efficient engines 1.6 liters or smaller has been cut in half, to 5 percent. Buyers have responded, with retail auto sales in the first three weeks after the tax cut rising 11 percent from the same period last year, according to the China Passenger Car Association.”
Either way, China’s fuel consumption is set to increase, even if it takes a little help from dear big brother. Then, again, if their industrial production continues to slow, not sure how they’ll afford to burn much more fuel even as prices stay relatively low.
Davy on Fri, 13th Nov 2015 9:09 am
Nearly every industrial, consumer, retail and wholesale sector is in disequilibrium in China because the economy and the economic leadership is dysfunctional. Just because you have more or less in China does not mean a trend. The place is a mess and getting worse. Things are being created because they can’t turn the switch off or the engine will never start back up. I am referring to status quo. China has been through collapse it can go through another but none in history will compare. We are going to see a huge amount of cars sitting silently rusting away with no one to use or buy them likely very soon. China is in an economic nose dive we just can’t see it clearly. When we do see it clearly it will be too late. China is the global end game walking.
Kenz300 on Fri, 13th Nov 2015 9:29 am
The world is in transition to safer, cleaner and cheaper alternative energy sources. Climate Change is real and we must deal with the cause (fossil fuels)
Half Of All Power Plants Built Last Year Were ‘Green’
http://www.huffingtonpost.com/entry/renewable-power-plants_5641fd3fe4b0b24aee4bbd49
————-
Wind Power Now Cheaper Than Natural Gas for Xcel, CEO Says – Renewable Energy World
http://www.renewableenergyworld.com/articles/2015/10/wind-power-now-cheaper-than-natural-gas-for-xcel-ceo-says.html
shortonoil on Fri, 13th Nov 2015 9:46 am
“Then, again, if their industrial production continues to slow, not sure how they’ll afford to burn much more fuel even as prices stay relatively low.”
The Petroleum Production System, which has lead the world’s economy for the past 150 years, is like any human constructed system. It flourishes and grows, stop growing, contracts, fragments into more workable parts, and at some point disappears. We are now in the contract, and fragmentation portion of the the cycle. Any improvement in one area will be offset by a reduction in another. This will continue as the system continually re-balances itself to the changing situation. The result will be that in a few years the system will change into something that today would be unrecognizable.
http://www.thehillsgroup.org/
BobInget on Fri, 13th Nov 2015 10:10 am
http://oilprice.com/Energy/Energy-General/Oman-Calls-OPEC-To-Action-Doesn't-Buy-Saudis-Strategy-Anymore.html
Below you will find a letter, directly from the trenches. Read all the way to the end. It will confirm most of what you all have been reading here and elsewhere.
For the record I am today adding to the first position in UWTI I initiated a few days ago. As my typical bottom feeding scenario I fully expected a much lower price after I bought my first trading lot ( smallest always) and figured that oil would drop to 40 and change should the carnage continue. Well it did and I have bought a similar sized second position this am at $7.00
Figuring that if 40 doesn’t hold I would expect a retest of the 37.xx level to come into play next and really think that GS would love to push oil to the $35 level to vindicate their call made a while ago. At this level the continue carnage in the industry will accelerate on the job front and moe importantly on the small producers ability to maintain their production since well maintenance will have to be almost completely abandoned IMHO.
A point in fact is that the company that owns the lease on my farm here in Ohio is basically worthless (MHR) and has not produced the well in over 9 months. The pumper ( a very good friend) has been laid off with no replacement for the old legacy shallow wells. 3 more months and I will file to take the lease back and put the well on my bond and never sell in to the market again. The asset will be left in the ground for my heirs to enjoy free gas on the property forever should this event transpire. I am not the only mineral owner in this area that plans to do the same thing in the courts. I can only imagine the number of new high dollar leases that will expire and not be renewed in the shale play here. One more example of capital destruction that has been brought to the market by the idea of producing shale as a reservoir rock which it is not.
As a side note I would forward the results of a JV with a very large independent here and the Chinese funding sources in the PA Marcellus shale.
We have a carried interest so the numbers are available each month and the results are horrific !!! Not a one of the 16 wells drilled over a year ago have reached payout or even close and have exhibited the expected decline profile of exactly 7% per month. At 2014 pricing these wells would never have returned pre tax investment to the funding party so you can imagine what the return looks like now. Needless to say the 100 well initial proposed drilling program has been curtailed to ZERO and the JV is currently being dismantled legally.
This BUST will be followed by the next BOOM as they always have in my 4 decades of being in the patch and those willing to gamble at the bottom wherever that might end up being should reap 1999 – 2013 type results and IMO it will be a shorter time frame to similar % returns BWTFDIK
Trade Well and Prosper…TODD1956
BobInget on Fri, 13th Nov 2015 10:25 am
UWTI is a short term trading vehicle (like a stock but futures based)
GS = Goldman Sacs
JV= Joint Venture
MHR= Magnum Hunter (just delisted from exchanges (worthless)
but what the fuck do (we) know ?
ghung on Fri, 13th Nov 2015 10:25 am
Short said; “Any improvement in one area will be offset by a reduction in another. This will continue as the system continually re-balances itself to the changing situation.”
I’m not sure robbing Peter to pay Paul’s fuel bill will allow ‘re-balancing’ for a long time yet. Creating debt to fund high-energy economies’ need for fuel is merely moving the imbalance to another sector; socialising losses accrued from the declining net benefits derived from burning fossil fuels. Even as the oil sector achieves some sort of balance, the deferred (reassigned) imbalances will remain as financial liabilities.
Industrial society-in-overshoot is irreconcilable in terms of real capital. That’s why we have extreme financialisation; fiat reconciliation creating the illusion of real claims on resources and production that that will never be available as growth stimulants. Limits to growth can’t be manipulated to balance excessive claims. We’re just pretending they can, even as we exacerbate overall systemic imbalance.
BobInget on Fri, 13th Nov 2015 10:40 am
Kenz,
I offered to organize finance for a one megawatt solar array on my farm. Pacific Power, who presents as a green utility, rejected my plan out of hand.
(PP would be contractually bound to buy my power for a predetermined number of years)
While point of use is logical, publicly traded utilities are determined to hang on to profits.
Massive coal burning power plants were practical before the planet faced three meter sea-level rise.
Coal burning ‘only’ prematurely killed off under twenty thousand people a year, now, we need count in billions displaced and starving.
shortonoil on Fri, 13th Nov 2015 11:11 am
“I’m not sure robbing Peter to pay Paul’s fuel bill will allow ‘re-balancing’ for a long time yet. Creating debt to fund high-energy economies’ need for fuel is merely moving the imbalance to another sector; socialising losses accrued from the declining net benefits derived from burning fossil fuels.”
Try to image what the petroleum industry will look like by 2030 (the dead state for the average barrel). Will EXXON still exist; Chevron, Petrobras. Likely not. Those companies require huge sales volumes, at elevated prices to support gigantic overhead. Companies like EXXON are likely to break up into a 100 different firms; supplying low production volumes to very regional markets. Chances are 75% of the gas stations in the country will have closed their doors, and the remainder will be supplied by the refinery down the street. The integrated global petroleum production system will be gone. You can’t ship mega quantities, mega distances at $5/ barrel.
Dredd on Fri, 13th Nov 2015 11:21 am
“IEA Sees …”
So, buy mortuary stocks.
(Weekend Rebel Science Excursion – 53)
BobInget on Fri, 13th Nov 2015 12:08 pm
Bold pronouncements SoO. Who’s your advisor, Ben Carson?
As you must know by now Short, the oil bidness has been here, many times before.
For those just taking an energy interest, look up “Texas Railroad Commission” history. (it’s not what you may think)
Warren Buffet always tells us, ‘buy when there’s blood in the streets”.
One quick look at where US oil needs to come from when domestic and SA supplies
dry up graphically demonstrates WB’s admonition.
http://www.cnn.com/2015/11/13/middleeast/beirut-suicide-bombings-explainer/
First and foremost. Saudi Arabia is flat-bread toast. Beginning Q 2, 2016 “All Oil Will Be ‘non OPEC oil'”.
Secondly: Because the natural gas part of
shale was way too successful, we will naturally gravitate to NG conversions and NG generated electricity powered trucks and automobiles. If NG prices rise from bankruptcy levels today, reasonably priced CNG will be in every so called ‘gas station’.
shortonoil on Fri, 13th Nov 2015 1:15 pm
“As you must know by now Short, the oil bidness has been here, many times before.”
The oil industry has never been here before; entropy is a one way street. Bolts don’t unrust, a cup of coffee never turns hot, and there are no perpetual motion machines. The petroleum system is wearing out just like everything ever created by man wears out. At today’s price ($40.50) the industry is going broke. The last time oil was $40.50 was 2004 and the industry was making money hands over fist. Today, the country with the largest oil reserve in the world can’t afford toilet paper, and the richest oil producing nation on earth now has to borrow money to pay its bills. The industry has cancelled over $200 billion in projects in the first six months of this year. Us rig count is down 65%, and shale is blowing up taking a $1 trillion in investment with it. If you can’t see that you should be reading Grimm’s Fairy Tales, and waiting for Santa to show up!
JuanP on Fri, 13th Nov 2015 4:39 pm
“renewables contributed almost half of the world’s new power generation capacity in 2014” I have come to distrust the use of the term generation capacity in this context, and the idea behind it. If I remember correctly this generation capacity measurements assume the sun always shines and the wind always blows on renewables, but that is not the case. A more relevant statistic, IMHO, is energy generated. Fossil fuel energy plants can use a much higher percentage of their potential generation capacity than wind gens and solar PVs over time.