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04 November 2010

IEA fears oil price escalation without global climate deal

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Per-barrel prices could top $135 within 25 years if current carbon targets are not strengthened, International Energy Agency report says

Failing to implement ambitious global climate change policies and cut fossil fuel subsidies will see oil prices skyrocket over the next two decades.

This is not the prediction of green groups or renewable energy firms, but the view of the International Energy Agency (IEA), the global body tasked with monitoring oil supplies, which is set to warn in a report next week that the world is on the brink of yet another oil price shock.

In its annual World Energy Outlook report, due to be released on 9 November and seen in draft format by the Financial Times, the energy watchdog will predict that by 2035, strong environmental policies could result in per-barrel oil prices $20 lower than a business-as-usual scenario.

But it cautions that without action, oil prices could soar from around $85 a barrel today to $135 by 2035.

The IEA's analysis takes into account the global accord signed in Copenhagen last year, as well as national commitments from G20 member countries to curb carbon emissions. But under its business-as-usual scenario, it anticipates that there will only be "weak implementation" of these commitments as they have not yet been reinforced with "specific measures".

"The message from this analysis is clear: the weaker and slower the response to the climate challenge, the greater the risk of oil scarcity and the economic cost for consuming countries," the Financial Times quoted the report as saying. "If governments act now to encourage more efficient use of oil and the development of alternatives, the demand for oil might begin to ease quite soon. "


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