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Global oil demand not to peak soon, India vulnerable to high prices: IEA

Very high prices are not good for oil producers either as it can create serious challenges for them, IEA Executive Director Fatih Birol said

Press Trust of India 

Crude oil
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International Agency said on Wednesday that global demand will not peak in the near future and India's vulnerability to high prices will increase with surge in its crude imports.

demand will continue to grow stronger this year, at about 1.5 million barrels per day, driven by petrochemicals and other sectors, IEA said.

"We are not going to see peak in demand very soon. I am now worried that we don't have enough investment to meet demand growth," he told reporters on the sideline of the 16th International Forum here.

He said price spike is not good for anybody, especially India, where the is heavily dependent on imports.

Very high prices are not good for producers either as it can create serious challenges for them, Birol said.

"Indian imports will grow more and more driven by transportation, petrochemicals and other sectors. Indian economy's vulnerability to international price will also increase. Some producing countries may have short term gain from very high prices; in medium and longer term, it is not good for sustainability of their economies," he said.

Talking about single product (crude oil) producing countries, he said they should not be vulnerable to prices because if they crash their economies may well face serious challenges.

He pointed to flow of shale and gas in the markets and like renewables to electric cars which may affect prices across the world.

The global market dynamics have changed substantially, he said, adding that if there is another price hike there will be a strong response from US shale production as also from and other developing countries.

Birol said: "We have seen first way of shale coming to markets....lower prices...but prices picked up . I am going to see second wave of shale coming. So the established producers push up price, we will see the response now coming from unconventional from US, and elsewhere. So it will put downward pressure on prices as a result of growing production from different countries."

On renewables, he said it is mainly solar PVs which are getting cheaper and cheaper and as such many people are using solar.

"Renewables are mainly used for but we use in many other thing-industry and homes. We think while the renewables will grow strongly, we will still need and gas for many years to come. Countries like need to look after their and gas security as well as their effort for upliftment of "

He was of the view that is an important country and its economic growth, which is one of the bright spots of global today, is linked to prices especially and gas.

In that respect it is very important for and global that we don't see price spikes, he added.

He also said,"We are seeing some surprises in and gas markets. Shale is growing very strongly. In the next five year, about two third of global demand would be met only by US production. This is definitely a game changer. Established producers will like to see a different picture in the markets but US is coming very strongly, so is Canada, and among other countries."

He also talked about challenges such as decline in output in mature fields and low investment in and gas exploration which may lead to crude price surge by established players.

First Published: Thu, April 12 2018. 00:44 IST