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A prolonged period of lower oil prices would benefit consumers, but would trigger energy-security concerns by increasing reliance on a small number of low-cost producers “or risk a sharp rebound in price if investment falls short,” the International Energy Agency warned Tuesday.
A surge in renewable energy deployment and a period of low oil prices is giving the world a false sense of energy security, the Paris-based agency warned in its benchmark annual World Energy Outlook.
“It would be a grave mistake to index our attention to energy security to changes in the oil price,” IEA executive director Fatih Birol, said in a statement. “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 global oil industry needs to invest US$630 billion “just to compensate for declining production at existing fields and to keep future output flat at today’s levels” the energy watchdog said.
But the beleaguered global oil and gas industry, which is estimated to collectively cut its capex spend by 20 per cent this year, is unlikely to hastily reach for its checkbooks, as it sees considerable uncertainty in the market.
The world is on a relentless path towards decarbonization, with estimates of 60 cents of every dollar invested in new power plants to 2040 on renewable energy technologies.
This trend would likely gain even more traction as carbon dioxide levels crossed the symbolic threshold of 400 parts per million this year, according to a report by the World Meteorological Organization on Monday.
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