While crude oil prices may fall significantly over the next year as a result of the current global petroleum surplus, the International Energy Agency yesterday warned of the possibility of a new oil crisis in the mid-to-late 1980s that would "deal a devastating blow" to the major industrial countries.
The 21-nation agency, set up after the 1973-74 Arab oil embargo to assist the United States and other industrialized nations with their energy policies, said its members are giving history a "good chance to repeat itself" by allowing themselves to be lulled into a false sense of security.
The fall in oil prices over the past year has been a major factor in the decline of inflation in the United States. But Ulf Lantze, executive director of the agency, pointed out that this decline in inflation also has been associated with a decrease in industrial activity and energy consumption.
"We are all familiar with the argument of some that the energy problem, and I presume that also means the oil problem, has been solved," Lantze said in presenting the agency's new World Energy Outlook at the National Press Club. "This 'solution' is hardly satisfactory, because poor economic growth has contributed heavily to the reduction of energy demand.
"If average annual economic growth in industrialized countries remains around 2 percent for the next decade, I would agree energy probably will not be a big problem for the rest of this decade," Lantze said. "But I doubt any democratic society could accept the increasing unemployment which such low growth would entail."
In its report the agency said, "There are no grounds for believing our energy problems have been solved. The basic vulnerability of the world economy to oil supply disruptions is far from being eliminated.
"The outlook for a period of declining real oil prices may . . . cause both complacency among energy consumers and hesitation among domestic energy producers. The result would be that potential problems foreseen for the late 1980s and early 1990s will not be dealt with in time."
While the agency agreed that "positive results are beginning to show" from improved conservation policies and the increased use of coal and other fuels, it said it will take "one to two decades before a reasonable balance among energy supplies can be achieved on a lasting basis."
In the meantime, the agency said, there is a real "danger that conservation and investment efforts" in alternate fuels may slow down in reaction to a sluggish economy that has depressed energy demand and a world oil market that is "likely to remain deceptively stable through the mid-1980s." The current worldwide oil surplus, the agency said, is deceptive in that it reflects the combined effects of the global recession, unusually mild winter weather conditions and a decision by major oil companies to reduce their inventories.
But the underlying market trends, the agency said, all point to world oil demand soaking up this surplus by the mid-1980s, with demand then surging ahead of available supplies by as much as "9 million to 21 million barrels per day by the end of the century."
This forecast of an increasingly tight world oil market, the agency said, is based on the likelihood that oil production in North America, the North Sea and the Soviet Union will level off or decline, while production by the Organization of Petroleum Exporting Countries is "restrained by declining reserves in some countries and political decisions in others."
At the same time, the agency said, the industrial countries will continue to rely heavily on imported oil, and will find themselves increasingly competing for available supplies with Third World nations, whose "oil import requirements are expected to rise significantly . . . as a result of economic development, increasing urbanization and industrialization."
The agency also warned in its report that even as oil markets are tightening in the decade ahead the dependence of the industrialized countries on imported natural gas is also "bound to increase."