Energy group warns of impending supply crisis

HOUSTON — More than a trillion dollars in annual investments to find new fossil fuels will be needed for the next two decades to avoid an energy crisis that could choke the global economy, the International Energy Agency said Wednesday.

The warning from the Paris-based agency comes at a time when major oil companies are pulling back investments amid the most severe economic downturn in a generation. The IEA stressed that it's essential for the world's energy companies to continue investing in new projects despite tumbling crude prices. The total potential tab through 2030: $26.3 trillion.

"While the situation facing the world is critical, it is vital we keep our eye on the medium- to long-term target of a sustainable energy future," IEA executive director Nobuo Tanaka told reporters at the release of its annual World Energy Outlook report in London.

There are growing fears that the simultaneous plunge in oil prices and a pullback in spending on exploration and production will result in another massive energy price spike.

"While macroeconomic conditions have lowered oil prices for the moment, there is nothing in the underlying economic picture that suggests this slowdown will be long-lived, maybe a year or more out," said former Secretary of Energy Spencer Abraham. "There was not enough production even when we were in triple-digit oil markets over the summer, and there's going to be a lot of pressure on the system when economies recover."

Tanaka said that state-run national oil companies — like those in Venezuela and Saudi Arabia — are projected to account for about 80 percent of the increase of both oil and natural gas production to 2030.

But it is "far from certain" those companies will make crucial investments.

Future sources of oil, the cost of producing it and the price consumers will have to pay for it are extremely uncertain, the IEA said.

That has prompted companies to withhold billions of dollars of investment in new oilfield and refining projects, even with major oil companies posting record profits this year thanks to triple-digit crude prices

Producers and refiners, large and small, are delaying and even canceling some work as they adjust to oil prices that have fallen more than 60 percent since peaking in July above $147.

Many companies have slashed capital spending budgets for at least the coming year. Just last week, ConocoPhillips and the state-run Saudi Arabian Oil Co. said they've postponed construction of a multibillion-dollar refinery in Saudi Arabia.