The drop in crude oil prices is being welcomed by many; however, the cut is only good news for everyone who's myopic.
The International Energy Agency (IEA) believes that oil prices are unlikely to return to $80 a barrel before 2020.
The IEA revealed in its annual World Energy Outlook that it expects demand growth to increase on an annual basis by 900,000 barrels per day till 2020. By 2040, the demand is anticipated touch 103.5 million barrels per day and oil prices are expected to hit $85 a barrel.
"An extended period of lower oil prices would benefit consumers but would trigger energy-security concerns by heightening reliance on a small number of low-cost producers, or risk a sharp rebound in price if investment falls short," says IEA.
This year's drop in oil prices to $50 per barrel has had a domino effect that led to major production cutback in shale oil in the U.S. Shale oil is a primary contributor to oil oversupply, which led to the resultant oil price drop in the past year.
A consequence of reducing oil prices is the lack of investments in the area. The declining investments are concerning and IEA's executive director Faith Birol is of the belief that the trend will continue into 2016.
This estimation is alarming as in the last two and half decades, no two consecutive years have had declining investments. If the investments continue to weaken, the oil market could face a serious setback in the near future.
The oil market could face several job cuts as a result of diminishing investments, which would in turn affect several mega-projects worldwide that are worth $200 billion.
Moreover, in the event that the price of oil remains at $50 for a barrel till 2020 and a cheaper conventional fuel alternative becomes available, the burgeoning electric car and biofuel market would face a setback. This means reduced control over curbing carbon emissions. The IEA also anticipates that over $800 billion worth productivity enhancements for aircrafts, trucks and cars will be mislaid.
According to the report, the low-oil price situation also indicates that the "Middle East's share in the oil market ends up higher than at any time in the last forty years." This could potentially mean that the Middle East would have greater control of the oil market - an event that could also have political ramifications.
