Insufficient investment, political instability and blocked access to key oil and gas reserves have distorted the global fossil fuel market and driven up prices, according to the International Energy Agency, which has downplayed concerns about imminent oil shortages.
For many oil companies, buying oil on increasingly volatile and expensive global crude markets is less risky than investing in new extraction facilities, the International Energy Agency’s (IEA) William Ramsay said on 31 January in Brussels.
During his presentation, Ramsay noted that the majority of the world’s key oil and gas reserves are located in places either largely off-limits to investors – Saudi Arabia and Venezuela, for instance – or in places that are plagued by political instability and even violent conflict, such as Iraq or the Caspian Sea region.
As a result, the crucial supply-side investments and reserve explorations needed to respond to steadily rising global demand for oil and gas are not being made, causing disruptions in the market and leading to higher prices, he said.
Proponents of the ‘peak oil’ theory, however, argue that the world’s oil supplies may simply be running out and that further explorations and supply-side investments can do little to correct this situation (see our LinksDossier).
EU Energy Commissioner Andris Piebalgs reflected these concerns during a 14 January speech before the Swiss Energy Congress, arguing that the coming supply crunch should inspire the EU to become less dependent on fossil fuels for its energy needs (EURACTIV 16/01/08).
Ramsay also criticised Russia’s state-owned energy giant Gazprom for investing more into the acquisition of ‘downstream’ demand-side infrastructure in order to expand its client base rather than investing in ‘upstream’ capacity, notably the development of new gas fields.
Gas output from the key western Siberian gas fields being exploited by Gazprom is steadily declining, leading to the likelihood of higher gas prices for consumers if new fields are not developed, Ramsay said.
But a Russian member of the audience argued that Gazprom is behaving no differently to most large, vertically-integrated EU energy firms, which prefer expanding their customer base to investing in expensive new supply capacity.