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Global Energy Markets in Transition: Implications for the economy, environment & geopolitics

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IEA Executive Director Fatih Birol's presentation to the Government of Japan's Analysis Meeting on International Finance and Economy on 21 April 2016 in Tokyo. Learn more at: http://www.iea.org/newsroomandevents/news/2016/april/iea-executive-director-briefs-japanese-pm-ahead-of-g7-summit.html

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Global Energy Markets in Transition: Implications for the economy, environment & geopolitics

  1. 1. © OECD/IEA 2016 Global Energy Markets in Transition: Implications for the economy, environment & geopolitics Dr. Fatih Birol Executive Director, International Energy Agency Analysis Meeting on International Finance and Economy Tokyo, 21 April 2016
  2. 2. © OECD/IEA 2016 Oil markets are gradually returning to balance as low prices take their toll In 2014 and 2015, oil supply greatly exceeded demand; the oil market is likely to return to balance in 2017, with high stock levels dampening any price recovery -2 -1 0 1 2 3 2014 2015 2016 2017 2018 2019 2020 2021 mb/d Demand Growth Supply Growth Stock change
  3. 3. © OECD/IEA 2016 Upstream oil and gas investment continues to fall Upstream oil and gas investment continues to fall, particularly in high-cost regions; this raises the prospect of increasing reliance on the Middle East in the future Upstream oil and gas investment -18% 0 100 200 300 400 500 600 700 800 900 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 USDbillion(nominal) -24%
  4. 4. © OECD/IEA 2016 Middle East oil export revenues If oil prices average USD 40 a barrel in 2016, Middle East oil export revenues would fall to some USD 310 billion, half the average level in the ten years to 2014 200 400 600 800 1 000 2011 2012 2013 2014 2015 2016 (est.) USDbillion(2015dollars) Lower oil revenues pose social & economic challenges for major producers
  5. 5. © OECD/IEA 2016 Cross border supply cut Terrorist attack - sabotage Natural disaster Technical disruption Tight market / shortages Algeria 2013/2016 Egypt/Sinaï 2011- 2015 Libya 2011-2013 Nigeria 2014-2016 Yemen 2012-2016 Argentina - Chile 2004 Russian-Ukrainian conflict 2006/2009/2014 India-Nepal 2015Katrina & Rita 2005 Japan 2011 Angola 2014 Argentina 2004- 2015 Polar Vortex 2014-2015 Mexico 2012-2014 Italy 2006/2012 Chile 2004-2007 Brazil 2014-2015 UK 2006/ 2010/ 2013 China 2009/2013/2015 Indonesia 2007 Canada 2014 India 2013 Pakistan 2011-2015 Egypt 2014Venezuela 2010-2011 Barbados 2015 Trinidad & Tobago 2010-2015 Lots of new LNG is coming online, but safeguarding gas security is important Unavailable LNG capacity has almost tripled over the past four years, highlighting security & investment challenges in key producer countries
  6. 6. © OECD/IEA 2016 Massive additional investments in efficiency, renewables, nuclear power and other low-carbon technologies are required to reach a 2°C pathway 16 20 24 28 32 36 40 2010 2015 2020 2025 2030 2035 2040 Gt Trend post-COP21 2°C Scenario 17.9 Gt Energy efficiency Fuel & technology switching in end-uses Renewables Nuclear CCS Other CO2 emissions in a post-COP21 world A 2°C pathway requires more technological innovation, investment & policy ambition
  7. 7. © OECD/IEA 2016 Final remarks  Energy investment decisions have long-term implications as sector depends on large-scale, high-cost capital assets  Today’s cuts in upstream oil & gas investment pose threats to energy security & could lead to greater price volatility  Risks to global energy security exacerbated by geopolitics  Environmental objectives will be met only through more investment in clean & resilient energy infrastructure  With looming energy security & environmental challenges, international co-operation is vital  including to overcome investment barriers & shortfalls

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