World Need for Oil Expected to Ease

International Energy Agency Says Conservation Efforts Will Trump Any Global Economic Recovery

By SPENCER SWARTZ
The International Energy Agency next week will make a "substantial" downward revision to its long-term forecast for global oil demand, a person familiar with the matter said, marking the second year running the group has slashed its view of the world's thirst for oil.

The forecast of slower growth in oil demand puts the IEA increasingly in a camp of contrarians bucking the popular view that crude demand will grow briskly in a postrecession world. That view holds that long-term demand will grow at a fast clip because of rising emerging-market wealth and consumption in places like China and India.

The IEA, which advises rich nations, such as the U.S., on energy matters, is set to use its closely watched annual World Energy Outlook report to forecast that improved energy-efficiency measures in developed nations, as well as climate-change legislation, will help to slow the rate of global oil consumption.

A person familiar with the Paris-based IEA's plans said "demand-management policies" are having more impact than previously expected in the developed world, which accounts for about 55% of world oil consumption. The IEA outlook, a guidepost for industry trends, is scheduled to be released Nov. 10.

A drop in industrial activity from the recession is also a big factor in the revision. Baseline assumptions used in the previous long-term outlook have to be adjusted down to account for the tough economic conditions of the past year.

Last year, the IEA shaved 10 million barrels a day off its long-term forecast and projected consumption in 2030 would hit 106 million barrels a day, or about 25% above current levels. It isn't clear how that compares with the cuts expected in this year's forecast by the IEA.

In the past, the IEA has been criticized for being too optimistic in its projections. Its current stance puts it in line with a growing list of industry analysts taking a more bearish view on future demand. Philip Verleger, a veteran independent energy economist based in Colorado, thinks consumers will keep a tight leash on oil demand over the next decade, in part as a result of policy makers battling climate change by mandating new energy-efficiency standards for everything from vehicles to building codes.

"The rise in global oil consumption over the next 10 years could be minimal," says Mr. Verleger.



Chart & Photo
http://s.wsj.net/public/resources/images...

http://online.wsj.com/article/SB12572791...'s_Most_Popular