NEW YORK (Reuters) - The BP oil spill in the Gulf of Mexico will have little or no effect on the medium-term outlook for offshore drilling and supplies, the International Energy Agency told Reuters on Tuesday.
Fatih Birol, the chief economist of the group that advises 28 industrialized economies, said while some projects may be delayed in the short-term, the need to increase future oil supplies meant governments will not impose draconian regulations in the wake of the BP (BP.L) spill that caused the United States’ worst ever oil spill.
“From what I’m hearing from most OECD governments is that they are considering increasing regulation and those that are put in place will be monitored more closely than they perhaps were in the past,” Birol told Reuters in a telephone interview.
“But they are sensitive to the fact these regulations should not be designed to slow the growth of offshore drilling or making these upstream investments unprofitable. There may be some delays to some project, but I do not think the BP oil spill will represent the end of offshore drilling.”
The Obama administration put a six-month ban on deepwater drilling in place following the massive oil spill at BP’s Macondo well in the Gulf of Mexico in April. The government is currently working on a report offering recommendations on possibly lifting the moratorium, which could be completed by the end of the month.
Birol said there was little evidence oil prices between $70 and $80 a barrel — the range they have traded in for most of the last three months — were damaging the economy, but he warned producing countries it would be dangerous for them to try and push prices higher.
“We do not have the evidence to say if prices around $75 are hurting the economic recovery for now, but if it goes above $80 a barrel it will be a definite risk to growth in some OECD countries and may even strangle the recovery before it really gets underway,” Birol said.
“Between $75 and $80, we have ample spare production and spare capacity. If oil prices go to $100, this will send a clear signal to oil importing countries that they need to speed up conservation efforts.
Birol was speaking to Reuters ahead of a press briefing at the United Nations in New York on Tuesday evening where he will present with the IEA executive director, Nobuo Tanaka, a report on steps needed to end energy poverty in the developing world.
Birol said conservation and substitution efforts have become more difficult as the vast majority of oil demand growth over the past five years has come in the transportation sector where there are few viable alternatives for now.
Additionally, most growth has been centred in countries such as China, India and those in the Middle East, where oil products are subsidised so consumers do not feel the full impact of rising prices.
A surge in oil prices back to $100 could change that, however, he said.
“While most growth in oil demand over the last five years has been in the transportation sector - for which there are no viable alternatives for now — the U.S., UK, Germany, China and Japan are all increasing support for the move towards electric cars,” Birol said.
“If the price goes to $100, these efforts will accelerate. That would not be good news for oil exporters.”
Reporting by David Sheppard; Editing by Marguerita Choy