Ah, just what a bunch of V8-starved Americans need to hear.
An International Energy Agency (IEA) report released last week says that the combination of weak global economies, increased oil supply from the Americas and better extraction technology will make oil "somewhat less tight over the medium term than it has been through most of the last decade."
The IEA, in its annual "medium term" report that forecasts supply and demand conditions for the next five years of so, also said oil demand from non-Organisation for Economic Co-operation and Development (OECD) countries (i.e., non-Western world nations) will overtake the demand from OECD nations as early as 2014 because of growing economies in Asia Pacific and the former Soviet countries. Even with this increase, OPEC may have "spare capacity," the report says.
Check out a synopsis of the report below. Then, you know, go burn a set of tires in celebration.
12 October 2012
Profound shifts in the regional distribution of oil demand and supply growth will redefine the refining industry and transform global oil trade over the next five years, the International Energy Agency (IEA) says in its annual Medium-Term Oil Market Report (MTOMR) released today. The IEA expects the global oil market to become somewhat less tight over the medium term than it has been through most of the last decade, as a combination of demand and supply factors will cause OPEC spare capacity to return to more comfortable levels. But it also highlights elevated supply and demand risks.
The MTOMR is the last in a series of medium-term forecasts that the IEA devotes to each of the four main primary energy sources: oil, gas, coal and renewable energy. A companion to the IEA's authoritative monthly Oil Market Report, the MTOMR offers a bridge between that monthly snapshot of market conditions and the oil section of the annual World Energy Outlook, which has a longer-term focus.
"The oil market is at a crossroads," said IEA Executive Director Maria van der Hoeven. "On each and every front – technology, geopolitics, the economy – potentially game-changing developments are taking place. This report is an attempt to bring it all together and sketch out what it might all mean for the next five years. It is thought-provoking and while it cannot possibly anticipate everything the next five years have in store, we hope it will help the reader think through the issues and gain a more refined understanding of the broader context in which tomorrow's surprises will play out."
The report's projection of a return to higher OPEC spare production capacity will be welcome news amid rising supply and demand risks, she added.
Today's weak economic environment has reduced expectations of oil demand growth for the medium term, yet the reallocation of demand by region and key product, which has been underway for the last 15 to 20 years, is expected to continue. Demand from non-OECD economies is forecast to overtake that in the OECD as early as 2014. The "East of Suez" region will account for most of the growth, led by Asia, the Former Soviet Union and the Middle East. Distillate demand is also expected to growth much faster than that for other products, so that gasoil and diesel by the end of the forecast period will account for the largest share by far of the demand barrel – a challenge for refiners and end-users alike.
On the supply side, most of the growth will come from the Americas, buoyed by the transformative power of advanced extractive technologies applied to light, tight oil deposits in the US and the Canadian oil sands that has exceeded earlier expectations. Among OPEC producers, Iraq stands out as its production capacity is expected to enter a new growth phase, which may continue even beyond the forecast period. These new supply sources are expected to more than offset decline rates and outages elsewhere as well as the continued impact of international sanctions of Iran.
The report also notes a continued rebalancing of refining capacity, with expansions in Asia and the Middle East more than offsetting continued attrition in the OECD. Internationally traded crude volumes are expected to decline sharply, as rising domestic production reduces North America's import needs and more Middle East oil is kept at home to satisfy growing regional demand rather than exported. Product trade may grow in both volume and scope, however.
The report also reviews regulatory changes that will come into play in financial oil markets and surveys the most recent academic literature on oil price formation, including the relationship between oil prices and interest rates, other commodity markets and macro-economic measures such as quantitative easing.
The Medium Term Oil Market Report is for sale at the IEA bookshop. Accredited journalists who would like more information or who wish to receive a complimentary copy should contact email@example.com.
About the IEA
The International Energy Agency is an autonomous organisation which works to ensure reliable, affordable and clean energy for its 28 member countries and beyond. Founded in response to the 1973/4 oil crisis, the IEA's initial role was to help countries co-ordinate a collective response to major disruptions in oil supply through the release of emergency oil stocks to the markets. While this continues to be a key aspect of its work, the IEA has evolved and expanded. It is at the heart of global dialogue on energy, providing reliable and unbiased research, statistics, analysis and recommendations.