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05 Nov 2010 02:11:27

Oil price to rise without climate deal

Oil prices will rise without climate change deal
International Energy Agency predicts price per oil barrel can rise to $135 by 2035 without agreement on global climate change policies.

According to predictions done by the International Energy Agency (IEA), failing to implement ambitious global climate change policies and cut fossil fuel subsidies will see oil prices skyrocket over the next two decades. The IEA is the global body tasked with monitoring oil supplies, which is set to warn in a report next week that the world is on the brink of yet another oil price shock.

The energy watchdog predicted in its annual World energy Outlook report –due to be released on 9 November and seen in draft format by the Financial Times- that by 2035 strong environmental policies could result in per-barrel oil prices $20 lower than a business-as-usual scenario. But it cautions that without action, oil prices could soar from around $85 a barrel today to $135 by 2035.

The International Energy Agency’s analysis takes into account the global accord signed in Copenhagen last year, as well as national commitments from G20 member countries to cut carbon emissions. It anticipates that there will be “weak implementation” of these commitments under its business-as-usual scenario, because they have not been reinforced with “specific measures”.

A global push away from fossil fuels would require an international climate change deal at the UN’s Cancun Summit

The predictions done by the International Energy Agency might not affect the energy industry, but with huge differences in oil prices under its various scenarios, energy companies are likely to find it increasingly difficult to estimate the viability of long-term investments in both high and low-carbon technologies.

The report predicts a global push away from fossil fuels in the best case scenario, which is likely to require an international deal at the UN’s Cancun climate change summit at the end of the month. However, most commentators are skeptical that an agreement can be reached at the Cancun summit following the uptight last-minute deals signed in Copenhagen last year.

This morning, speaking on Radio 4, the Council of Europe rapporteur on climate change, Lord Prescott, said that delegates at the Cancun summit should abandon attempts to negotiate a legally binding agreement on carbon emissions, and advocated extending the Kyoto framework for a further five years beyond 2012 to allow time for a voluntary framework to be established.

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