Shale will make the U.S. world’s top oil producer

In the meantime, says the IEA’s report, fossil fuels will remain dominant in the global energy mix, supported by subsidies that jumped by almost 30% to $523 billion last year, driven mainly by increases in the Middle East and North Africa.

Global oil demand grows by 7 mb/d to 2020 and exceeds 99 mb/d in 2035, by which time oil prices reach $125/barrel in real terms (over $215/barrel in nominal terms). A surge in unconventional and deep-water oil boosts non-OPEC supply over the current decade, but the world relies increasingly on OPEC after 2020. Iraq accounts for 45% of the growth in global oil production to 2035 and becomes the second-largest global oil exporter, overtaking Russia.

While the regional picture for natural gas varies, the global outlook over the coming decades looks to be bright, as demand increases by 50% to 5 trillion cubic metres in 2035. Nearly half of the increase in production to 2035 is from unconventional gas, with most of this coming from the United States, Australia and China.

“Whether demand for coal carries on rising strongly or changes course radically will depend on the strength of policy decisions around lower-emissions energy sources and changes in the price of coal relative to natural gas. In the New Policies Scenario, global coal demand increases by 21% and is heavily focused in China and India,” says the report.

Canada not so happy

Fatih Birol, IEA Chief Economist and the study’s lead author warns that greater efforts on energy efficiency would cut the growth in global energy demand by half.

“Global oil demand would peak before 2020 and be almost 13 mb/d lower by 2035, a reduction equal to the current production of Russia and Norway combined,” the expert says.

The Agency’s report was not welcome by Canada, as the country is determined to build pipelines that would take the crude from Alberta’s oil sands to the U.S. and to Asian markets.

Currently the U.S. imports close to 10 million barrels of crude per day and Canada’s accounts for 30% of that total. If the IEA is correct, Canada needs to tap into other growing markets as soon as possible, analysts believe.

The report concludes that accrued resources would facilitate a gradual reorientation of the global economy, boosting cumulative economic output to 2035 by $18 trillion, with the biggest gains in India, China, the U.S. and Europe.