Bush Mideast oil talk won’t spur OPEC to invest: IEA

By Stella Dawson

LONDON (Reuters) – U.S. President George W. Bush’s goal to
cut dependency on Middle East oil won’t help persuade OPEC to
spend the huge amounts of cash needed to meet future oil
demand, the head of the West’s energy watchdog said on Monday.

In his State of the Union address last Tuesday, Bush said
America was addicted to oil and needed to slash imports from
the Middle East by more than 75 percent by 2025.

“We are absolutely delighted that President Bush has
recognized at last that his country is addicted to oil,”
International Energy Agency head Claude Mandil told an
economics conference in London.

“But the way he said it – to get rid of dependence on
Middle East oil – will not help us convince those countries
that they will have to increase their investment.”

The Organization of Petroluem Exporting Countries’ Middle
East members include the world’s largest oil producer Saudi
Arabia, and major producers Iran, Kuwait, the UAE and Iraq.

Mandil said that the oil price would jump if OPEC failed to
make the investment of around $500 billion needed to play its
part in meeting global oil demand of 115 million barrels per
day (bpd) in 2030.

“We would lack oil and the price would skyrocket unless
countries make serious efforts to reduce consumption,” he said.

Supply would need to rise around 30 million bpd from
expected output in 2006 of 85 million bpd to meet the IEA’s
2030 demand forecast.

The IEA was “not at all convinced” that OPEC countries were
willing to make the necessary investment, Mandil said.

POLITICAL RISKS

The IEA chief said market concern about an interruption of
supplies may prevent oil prices from falling this year from
their levels in 2005 as supply increases.

U.S. crude prices rose on Monday to near $66 a barrel after
Iran ended snap U.N. checks of its nuclear sites and said it
was resuming uranium enrichment, sparking fears it might
ultimately withhold oil exports.

“(Prices) should be lower for lots of reasons this year,”
Mandil said. “…I’m not sure that will happen.”

Mandil cited political risk from Russia, Venezuela and
Bolivia as reasons for caution, as well as the rising costs for
oil producers of projects to increase output.

Russia’s reputation as a reliable supplier was tarnished in
January when it briefly cut gas off supplies to Ukraine in a
dispute over prices, a move that disrupted Russian deliveries
to Europe most of which pass through Ukraine.

Venezuela’s Hugo Chavez regularly locks horns with the U.S.
administration, and warned on Sunday that he could shut
Venezuelan oil refineries in the United States and sell his
country’s oil elsewhere if Washington cuts ties.

ENERGY EFFICIENCY

Mandil said that the world’s energy habits were
unsustainable and that governments needed to do more to
increase energy efficiency. The IEA expressed similar opinions
in its World Energy Outlook in November.

He said that energy efficiency had increased on average by
around 2 percent per year during the oil shocks and price rises
of the 1970s and 1980s.

But even with the high prices of the past two years,
efficiency is only improving at about 1 percent per year, he
said.

“Governments and consumers should now be really serious in
energy efficiency measures,” he said.

Current policy has the U.S. on course to increase, rather
than decrease, its dependency on Middle East oil.

The Energy Information Administration, the statistical arm
of the U.S. Department of Energy, forecasts that the North
American region will double imports from the Gulf region to
5.78 million bpd in 2025, up form 2.84 million bpd in 2002.