Over the next five years, global oil demand growth will slow, OPEC capacity growth will face headwinds and regional imbalances in gasoline and diesel markets will widen, the International Energy Agency (IEA) has said in its annual five-year oil market outlook report released today in Paris.

Windfall gains Forecasting that the unconventional supply revolution in the form of shale oil boom currently sweeping North America will expand to other region before the end of the decade, IEA said that in five years, North America will have the capacity to become a net exporter of oil liquids.

On the other hand, many OPEC producers will face issues such as ageing oilfields and security concerns which have created a climate of investment risk that has deterred some international oil companies from investing.

The IEA report sees global demand rising by 1.3 per cent per year to 99.1 million barrels a day by 2019, even while expecting that the market will hit an inflexion point after which demand growth may start to decelerate due to high oil prices, environmental concerns and cheaper fuel substitute. As for India, the IEA report adds that the country is a textbook case for the demand effects of high oil prices in non-OECD, oil-importing economies.

Stung by the cost of diesel subsidies amid sustained high oil prices, the government has adopted a policy of gradual lowering subsidies, which has immediately reduced diesel demand growth.

“India may reach full diesel price deregulation by year-end, putting further downward pressure on growth. Currency fluctuations have been a compounding factor, at times further increasing the subsidy burden in local currency, and cementing the government’s resolve to bring it down,” the report pointed out.

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