IEA: Oil Prices to Remain Low Until 2020

November 10, 2015

From this morning’s Fortune CEO Daily email:

Oil prices are unlikely to return to $80 a barrel before the end of the decade, the International Energy Agency said this morning. And if OPEC continues its policy of pumping oil at record rates to increase market share, they could remain close to $50 a barrel through 2020.

The agency’s World Energy Outlook is closely watched by the industry, and its new report is likely to dash any remaining hopes of a quick oil rebound. Slower global demand, improvements in efficiency, and growth in alternative energy sources are all taking their toll. You can read the full report here.

The agency also noted that wind and solar energy accounted for half of all new power plants in 2014 – while growth of coal is slowing, after rising to 29% of the global energy mix from 23% in 2000. But the agency warned that more conventional generating capacity will have to be put in place in the coming decades to deal with the intermittent nature of wind and solar. You can see the effects these days in Texas, where an abundance of wind energy has led companies to offer free electricity between 9 p.m. and 6 a.m.

It’s amazing to me that experts can predict this, but they couldn’t predict the drop in price in the first place. I don’t remember seeing or reading anything forecasting oil prices dropping in 2013 or 2014. Anyone else? Did I miss something?

Maybe this will put to rest the idea that big oil sets the price of oil. I can promise you that if they did control the price, oil wouldn’t be sitting at under $50 per barrel right now.

6 responses to IEA: Oil Prices to Remain Low Until 2020

  1. “You can see the effects these days in Texas, where an abundance of wind energy has led companies to offer free electricity between 9 p.m. and 6 a.m.”

    This is annoying that they would mention it. This has nothing to do with abundance of wind energy for free nights. That is just another gimmick the same as giving away a nest with a 1 year contract. They adjust the rates the rest of the time to where you end up paying pretty much the same price unless you are one of the few people that can somehow really use lots of electric at night.

    And for the situation with them calling it out staying under $50 until 2020 I am with you that it is hard to believe they know what the heck will happen when everything changes so quickly. For my job I would love to see it go back up a little to get some investment and it also is discouraging spending more money on renewables as well.

    • Thanks for your comment, Philip. I have never researched the “free electricity” offers because they have never been available in my area. But, you are correct. Nothing is free.

  2. I find it hard to believe they are any more accurate in this estimate than most other estimates. There are so many factors at play. I would not bet on it.

  3. About the prediction of lower oil prices, there is an article on CNBC dated July 15, 2013:

    “Oil prices should be about half of today’s $105 a barrel by the end of the year, Gulf Oil CEO Joe Petrowski predicted on CNBC on Monday.

    He stressed on “Squawk Box” that this trend is mostly on the supply side because record amounts of oil and natural gas are being produced in the United States and in Canada and OPEC supplies are higher…”

    So, I would say “yes”, big oil does set the price of oil, indirectly, based on how much (or little) oil they tap in any given amount of time. Too much supply, prices will drop — too little supply, prices will rise.

    • And then the same guy said this on December 15, 2014:

      “I do believe we’ve bottomed out on oil prices in the mid-$50s. There are lots of signs in the market that we’re going to stabilize here and move higher over the next 60 days,” Petrowski said in a “Squawk Box” interview.

      Source