Energy Future

World’s energy bill to hit $48 trillion by 2035: IEA

Oil prices will rise $15 by 2025: IEA
Oil prices will rise $15 by 2025: IEA

Countries must invest nearly $50 trillion to meet the world's energy needs over the next 21 years, the International Energy Agency (IEA) reported on Tuesday.

The agency, which advises industrialized nations on energy policy, said today's annual global investment in energy supply of $1.6 trillion needs to rise steadily over the coming decades towards $2 trillion. On top of that, Global spending on energy efficiency needs to increase to $550 billion a year, the IEA added.

"The reliability and sustainability of our future energy system depend on investment," said Executive Director Maria van der Hoeven, in the IEA's world energy outlook report published on Tuesday.

"There is a real risk of shortfalls, with knock-on effects on regional or global energy security, as well as the risk that investments are misdirected because environmental impacts are not properly reflected in prices," she added.

The IEA said that around 80 percent of the upcoming bill would be for energy supply, including investment in fossil fuel extraction, transport and oil refining, spending on low-carbon technologies including renewables and nuclear, and transmission and distribution. The remaining $8 trillion will go towards boosting energy efficiency.

IEA Chief Economist Fatih Birol told CNBC that governments would play an expanded role in energy supply in the future.

"When we look at ownership of assets—the oil fields, gas fields, power plants—we see an increasing role of governments and states in the ownership picture," he said on Tuesday.

Which means, that among other things... energy decisions, investment decisions may not only be based on commercial considerations, other things may also play a role."

Nearly two-thirds of investment is forecast to take place in emerging economies, moving beyond China to include other parts of Asia, as well as Africa and Latin America.

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However, aging infrastructure and demands from climate-change policies will also increase the energy bills across the OECD group of developed economies.

"The investment path traced in the report falls well short of reaching climate stabilization goals, as today's policies and market signals are not strong enough to switch investment to low-carbon sources and energy efficiency at the necessary scale and speed," the report warned.

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Last month, the U.K.'s Global Sustainability Institute reported that an energy crisis loomed for European countries like France and Italy, which each have less than a year's stockpile of gas and coal.

"I think Europe may risk seeing the lights going off, mainly as a result of not having thermal capacity," said Birol.

Plus, industry participants have warned that Australia's energy sector is under threat from exploding costs and inadequate productivity, which could see it lose out on $180 billion in investment over the next two decades.

The IEA added that Middle Eastern investment in energy supply and efficiency needed to rise in order to prevent oil prices spiking.

"North America has been at the center of the surge in global investment in recent years," said the IEA.

"But, in the case of oil, the focus for meeting incremental demand shifts towards the main conventional resource-holders in the Middle East, as the rise in non-OPEC supply starts to run out of steam in the 2020s."

Birol said: "In order to see this production grow we have to see the investment coming in now… but today when I look at the Middle Eastern countries, in most of them, there is not a big appetite for investment."

The report warned that if Middle East investment fails to pick up—a possible prospect given competing government priorities for spending, as well as political security and logistical hurdles—oil markets will become more volatile, with prices $15 per barrel higher on average by 2025.

"Definitely not good news for many consumers in the world," said Birol.

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