Oil prices have collapsed over the past 18 months, and have caused a wave of destruction to the economies of Canada, Russia and Saudi Arabia, which have depended upon their oil reserves to stimulate their economies. These countries may not see any respite for another few years, warns the International Energy Agency (IEA).
According to a new report from the IEA, oil won’t return to $80 a barrel until 2020. This comes as demand growth is still under one million barrels per day, immense declines in investments and major cutbacks in production.
The World Energy Outlook, released Tuesday, found that demand growth will increase each year by around 900,000 barrels per day until 2020. It will eventually reach 103.5 million barrels per day by the year 2040.
“Our expectation is to see prices gradually rising to $80 around 2020,” the IEA said. “We estimate this year investments in oil will decline more than 20 percent. But, perhaps even more importantly, this decline will continue next year as well.”
It added: “In the last 25 years, we have never seen two consecutive years where the investments are declining and this may well have implications for the oil market in the years to come.”
At the time of this writing, oil is trading at just over $43 a barrel.
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