Energy price spike looms, agency says

The International Energy Agency warned Tuesday that governments aren't doing enough to prepare for the next spike in energy prices.

The Paris-based IEA said more must be done to increase energy efficiency and boost green technologies in order to meet what it predicts will be a 36 per cent jump in energy demand  — increasingly driven by China — between 2008 and 2035.

The IEA — a policy adviser to 28 member countries, mostly industrialized oil consumers — predicted in its annual World Energy Outlook that global oil demand will rise to 99 million barrels a day by 2035.

That would be some 15 million barrels a day higher than last year, but a slower increase than the 105 million barrels a day by 2030 it forecast last year.

Still, it said this will push supplies to near their peak over the coming decades, endangering government pledges to limit the increase in global temperatures to two degrees Celsius.

Executive Director Nobuo Tanaka said the energy world is facing "unprecedented uncertainty."

He said the Copenhagen Accord on tackling global warming and an agreement among G20 countries to phase out subsidies are positive steps but more needs to be done to use energy more efficiently.

The IEA estimated China's demand will jump by 75 per cent, accounting for more than a third of the increase in demand.

"It is hard to overestimate the growing importance of China in global energy," Tanaka told reporters in London.

"How the country responds to the threats to global energy security and climate posed by rising fossil fuel use will have far-reaching consequences for the rest of the world."

The IEA report predicted that oil prices could soar as high as $135 US a barrel and are expected to average $113 a barrel by 2035, compared to an average of $60 in 2009, as higher prices are needed to bring demand into balance with supply.

The Organization of Petroleum Exporting Countries will account for 50 per cent of the world's oil supply by 2035 as production from outside the group falters, it said.

OPEC, which already pumps around 40 per cent of the world's oil, last week forecast that world energy demand will rise by 40 per cent in the next three decades even as the appetite for oil shrinks because some of the need will be met by other sources.

The IEA report said that investment of $5.7 trillion is needed over 2010-35 to produce more electricity, while biofuels need another $335 billion.

The agency also forecast that consumption of natural gas will increase 44 per cent to 4.5 trillion cubic meters in 2035, from 3.1 trillion cubic meters in 2008.