Energy agency warns on supply

More than $1 trillion in annual investments to find new fossil fuels will be needed for the next two decades to avoid an energy crisis that could choke the global economy, the International Energy Agency said Wednesday.

The warning from the Paris-based agency comes as major oil companies pull back investments amid the most severe economic downturn in a generation. The IEA stressed that it was essential for the world’s energy companies to continue investing in new projects despite tumbling crude prices. The total potential tab through 2030: $26.3 trillion.

“While the situation facing the world is critical, it is vital we keep our eye on the medium- to long-term target of a sustainable energy future,” IEA Executive Director Nobuo Tanaka said at the release of its annual World Energy Outlook report.

Fears are growing that the simultaneous plunge in oil prices and a pullback in spending on exploration and production will result in another massive energy price increase.

“While macroeconomic conditions have lowered oil prices for the moment, there is nothing in the underlying economic picture that suggests this slowdown will be long-lived,” said former U.S. Secretary of Energy Spencer Abraham. “There was not enough production even when we were in triple-digit oil markets over the summer, and there’s going to be a lot of pressure on the system when economies recover.”

Tanaka said that state-run national oil companies -- like those in Venezuela and Saudi Arabia -- are projected to account for about 80% of the increase of both oil and natural gas production to 2030.

But it is “far from certain” that those companies will make the crucial investments.

Future sources of oil, the cost of producing it and the price consumers will have to pay for it are extremely uncertain, the IEA said.

That has prompted companies to withhold billions of dollars of investment in new oil field and refining projects, even with major oil companies posting record profits this year thanks to triple-digit-per-barrel crude prices.

Producers and refiners, large and small, are delaying and even canceling some work as they adjust to oil prices that have fallen more than 60% since peaking in July above $147.