IEA: Climate Pledge Failure Would Boost Oil Prices

(Reuters) – A reduction of ten percent in oil demand could knock about $20 off the price of a barrel of crude by 2035 if nations meet their climate change pledges and cut fossil fuel subsidies, the International Energy Agency says.

“The weaker and slower the response to the climate challenge, the greater the risk of oil scarcity and the economic cost for consuming countries,” the Financial Times on Thursday quoted a draft of the 2010 World Energy Outlook (WEO) as saying.

The report by the IEA, which advises 28 developed countries on energy issues, is due for release on November 9.

The inflation-adjusted price of oil would be $113 by 2035 in the WEO scenario that takes into account new environmental policies, versus $135 in the main scenario, with demand at 99 million barrels per day (bpd) and 107 million bpd respectively.

The IEA also forecasts Iraqi oil output will almost double in the next decade, reaching 4.8 million bpd by 2020, overtaking Iran “soon after 2015,” according to the FT.

IEA Executive Director Nobuo Tanaka told Reuters this week it would be “very difficult” to reach agreement at this year’s Cancun meeting of the Conference of the Parties (COP) to the United Nations Framework Convention Climate Change Conference (UNFCCC).

The COP-16 will meet in Mexico from November 29 to December 10 as a follow-up to last year’s Copenhagen meeting, which produced limited results on commitments to reduce carbon dioxide (CO2) emissions.

In last year’s WEO, the Paris-based agency presented a business-as-usual scenario assuming no policies were adopted to curb emissions, where global temperatures would rise by 6 degrees Celsius by 2050 from pre-industrial levels.

The agency also presented a second scenario to cap global warming to just 2 degrees Celsius, which implied cutting emissions to stabilize the concentration of atmospheric carbon dioxide at 450 particles per million (ppm).

A scenario in this year’s WEO will include last year’s Copenhagen decisions, which would fall somewhere between the business-as-usual scenario and the 450 scenario of last year’s outlook, Tanaka said.

Article by Alejandro Barbajosa, edited by Himani Sarkar, appearing courtesy Reuters.

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