Oil will not reach $80 per barrel until 2020
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Fatih Birol, the executive director of the International Energy Agency told the Financial Times that a perfect storm will keep prices low until 2020 - low demand and bountiful supply.
The price of crude oil is around $44 per barrel. Last summer, it was around $115 per barrel. The IEA predicts that oil prices will not rise to $80 per barrel for at least four years.
Demand is expected to only grow by 1% by 2020 and by only 5% over the next 20 years. In tandem, oil supply is expected to be excessive and therefore will not fully consumed, leaving a glut in the market.
"We are approaching the end of the single largest demand growth story in energy history," said Birol to the FT. "Demand is not as strong as we have seen in the past as a result of efficiency [and climate] policies [globally]."
Birol, who has spent 20 years at the IEA, pointed out that China is largely to blame for the lack of demand - but not necessarily because of the slowdown in its economy.
China was the biggest reason for a surge in oil consumption over the last 15 years, alongside the growth of other emerging market economies. But as the country moves towards becoming a more consumer-led economy, demand for oil will surge less rapidly even if growth stays strong.
The OPEC oil-producing cartel, of which Saudi Arabia is a key member, decided against cutting production targets last year, letting the price fall from around $100 to less than $50.
The country has pretty much said that it doesn't care about how low oil is ravaging the markets - its current policy seem to be to pump so much oil that prices stay too low for competitors to make a profit - leading to massive losses at big oil companies, suppressed inflation globally, and even a downgrade for Saudi Arabia's own sovereign debt.
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