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The Oil Price Fall and its Implications for the
Global Economy and Energy Markets
Introductory Remarks
Fatih Birol
Chief Economist, IEA
© OECD/IEA 2013
Who is driving change in oil markets?
Net oil production and consumption changes, 2008-2014
Oil production
mb/d
5
4
3
Oil consumption
IEA countries
OPEC countries
2
1
0
-1
-2
-3
OPEC remains central to the global oil outlook, but over the past 6 years it is the IEA
that has freed up more than 6 mb/d to fuel rising consumption in other markets
© OECD/IEA 2013
Looking ahead on the oil price
 Buoyant supply in North America, weaker global demand & a shift
in OPEC stance has brought prices down – but for how long?
 Lower prices are curtailing many companies’ upstream spending
plans, with implications for future output
 Over time, squeezed cash flow will constrain the capacity of North
America & Brazil to act as engines of global supply growth
 An oil price at current levels provides some breathing space to
major oil importers, boosting demand & GDP
 It also accelerates reliance on low-cost producers in the Middle
East, some of which face major investment challenges
© OECD/IEA 2013
The price is hitting upstream spending
Billion dollars
Global upstream oil and gas investment
750
20%
500
250
2012
2013
2014
2015 (est.)
Announced capex cuts for 2015 are highest (at up to 40%) in North America & Brazil;
for tight oil, a decision to stop drilling feeds through more quickly to production levels
© OECD/IEA 2013
Projecting future developments
 Central scenario in WEO-2015 assumes market rebalancing by 2020
at a higher price, & further gradual increases thereafter
 But there are those who see prices staying lower for longer
 We examine this possibility in a WEO-2015 ‘Low Oil Price Scenario’,
an additional global modelling exercise that assumes:
 Strategy among large resource-holders to prioritise market share &
minimise substitution away from oil remains in place for the long term
 Optimistic view on geopolitics & ability of main producing regions to
weather the impact of lower hydrocarbon revenues
 Strong resilience of some non-OPEC sources of supply, notably US tight oil
 Efficiency policies & subsidy removal that limit the rebound in oil use
© OECD/IEA 2013