AFP | Jan 17, 2015

ABU DHABI — Falling oil prices could have a negative impact on global efforts to develop renewable energy sources, experts warned Saturday at a conference in Abu Dhabi.

Oil prices have fallen by almost 60 per cent since June, crashing on worries over global oversupply and weak demand in a faltering world economy.

Participants at the International Renewable Energy Agency (IRENA) conference that opened Saturday in the United Arab Emirates (UAE) said the trend could spell doom for plans to shift to clean energy.

The fall in oil prices could be a “game changer”, Italy’s Deputy Minister for Economic Development Claudio Vincenti told the meeting that concludes on Sunday.

In the past, a rise in oil prices had encouraged clean energy investments, said Vincenti, adding that a long-term fall in prices could shift the balance among various energy sources. He did not elaborate.

Salem Al Hajraf, who represented the oil-rich emirate of Kuwait at the conference, agreed saying falling oil prices are posing a “major challenge” this year as was the case two decades ago.

“The fall of oil prices in the 80s was a main reason behind the collapse of many renewable energy projects,” he told participants.

Renewable energy, which relies on solar, wind and other sources, is essential for meeting global CO2 emission targets.

Delegates from more than 150 countries attended the opening session of the IRENA conference, including Israel which has no diplomatic relations with the UAE .

Representatives from more than 110 international organisations are also taking part in the meeting.

“The story of renewables is rapidly evolving and as the importance of renewable energy grows, so does the relevance of the agency’s work,” IRENA Director General Adnan Amin told the conference.

He indicated that total world investments in renewable energies have reached $264 billion in 2014, $50 billion more than the previous year.

During the meeting, the Abu Dhabi Fund for Development, in partnership with IRENA, will announce a series of loans for five renewable energy projects in developing countries, organisers said.

Abu Dhabi-based IRENA, with 137 member-states and the European Union, aims to promote the sustainable use of all forms of renewable energy.

The conference coincides with a series of events organised under the banner of Abu Dhabi Sustainability Week, including Future Energy Summit on Sunday and International Water Summit on Monday.

Egyptian President Abdel Fattah Al Sisi is expected to attend Future Energy Summit while French Energy and Environment Minister Segolene Royal will take part in the International Water Summit.

Separately, the dramatic collapse in oil prices is still insufficient to stimulate crude consumption as weakness in the economy has cancelled out the benefits of cheaper crude, the International Energy Agency (IEA) said Friday.

Although prices are expected to remain depressed in the short-term, there are now signs that the tide will turn, the agency added.

Crude prices have crashed to near six-year lows, plunging some 60 per cent from June over a supply glut and weak demand.

“How low the market’s floor will be is anyone’s guess,” said the IEA in its latest monthly report on the oil market. “A price recovery, barring any major disruption, may not be imminent, but signs are mounting that the tide will turn.”

That “rebalancing may begin to occur in the second half of the year”, the IEA added, stressing however that this does not imply a price recovery to recent years’ highs as the market is “undergoing a historic shift”.

“OPEC’s embrace of market forces last November is a game change,” it indicated, referring to the decision by the Organisation of Petroleum Exporting Countries (OPEC) to maintain production levels despite plunging prices.

The shale energy revolution in the United States has also changed the landscape, it said.

Non-OPEC output declines

Any change in direction of oil prices would be due to the supply end as energy companies have begun axing budgets and cancelling new projects.

The IEA said it was slashing its forecasts for non-OPEC supply growth for 2015 by 350,000 barrels a day from last month’s report.

Colombia led the declines, said the IEA, cutting its forecast for Colombian production by 175,000 barrels a day.

Canada’s was slashed by 95,000 barrels a day.

Among the latest casualties of the price rout was a $6.5 billion project in Qatar, which Shell scrapped last week.

But these actions will only have an impact on prices “further down the road”.

Demand, which would have an immediate impact on prices, does not appear to be picking up.

“With a few notable exceptions such as the United States, lower prices do not appear to be stimulating demand just yet,” said the IEA.

“That is because the usual benefits of lower prices, increased household disposable income, reduced industry input costs, have been largely offset by weak underlying economic conditions, which have themselves been a major reason for the price drop in the first place,” it added.

The agency therefore maintained its oil demand forecast for 2015, expecting it to grow by 0.9 million barrels a day to reach 93.3 million barrels.

Brent North Sea crude for delivery in March was trading just under $50 on Friday, while US benchmark West Texas Intermediate for February was changing hands at around $47.

OPEC decided in November to maintain its collective output ceiling at 30 million barrels of oil per day.

OPEC kingpin Saudi Arabia has stated that OPEC will not cut production even if the price drops to $20 per barrel, in a move aimed at hurting US shale oil producers.