IEA wary of economic impact on energy

PARIS, June 30 (UPI) -- The lingering economic crisis and disputes between Russia and Ukraine create uncertainties in the oil and gas sector, the International Energy Agency reports.

"The global financial crisis has turned the economic landscape upside down, with huge implications for the oil and gas sector," said Nobuo Tanaka, executive director of the IEA.

Tanaka said modest recovery in prices may be a false front as reactionary increases could undermine optimism, while plummeting natural gas prices create uncertainty in terms of market fundamentals.

"Whether we end up facing a supply crunch again by mid-decade, or with a more comfortable buffer of supply flexibility, depends largely on the pace of economic recovery and government action on efficiency," said Tanaka.

In terms of oil demand, the IEA said it forecasts a 0.4 percent to 1.4 percent growth in the next year, while supplies grow by 4 million barrels per day over the next few years, which is 1.5 million barrels less than predicted in 2008.

Supplies, the IEA warns, could be further depressed if the recession translates to lower investments in upstream activity.

Meanwhile, Europe faces a looming energy crisis due to the fallout from gas disputes between Russia and Ukraine. Around 80 percent of all Russian gas bound for Europe travels through Ukraine, and the IEA said it is "seriously concerned" about the likelihood of another regional gas shortage.