IEEJ：December 2015

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Special Bulletin
A Japanese Perspective on the International Energy Landscape (251)

December 24, 2015

IEA Executive Director Dr. Birol’s Presentation at an International Energy
Symposium in Tokyo
Ken Koyama, PhD
Chief Economist, Managing Director
The Institute of Energy Economics, JapanOn December 21, International Energy Agency Executive Director Dr. Fatih Birol made apresentation at an international energy symposium at Keidanren Hall in Tokyo. His presentation
focused on the IEA’s World Energy Outlook 2015 released in November 2015, followed by a panel
discussion in which I participated along with Dr. Birol, Mr. Nobuo Tanaka, former IEA Executive
Director and President of the Sasakawa Peace Foundation, and Mr. Mitsutsune Yamaguchi, Special
Advisor to the Research Institute of Innovative Technology for the Earth. In the following, I would
like to summarize the points that were impressive to me mainly in Dr. Birol’s presentation.
First, on the crude oil price plunge as the most interesting problem regarding theinternational energy situation at present, Dr. Birol emphasized (1) that crude oil prices would not
remain at the current low levels for long and (2) that low crude oil prices have shadowy aspects ofconcern while providing some advantages. The first point indicates Dr. Birol’s belief that while theinternational oil market is plagued with oversupply and sees various short-term factors that could
loosen the supply-demand balance further, various market reactions to the low prices are emerging
both on the supply and demand sides and would lead the market to go in the direction of rebalancing.
Dr. Birol pointed out that the international oil industry as a whole substantially reduced oil sector
investment in 2015 and would do so in 2016 and that substantial oil sector investment cuts had neverbeen seen for a second straight year in the past decades. It was impressive that Dr. Birol emphasizedthat the investment cuts would have significant implications for future oil supply expansion. He also
indicated that as the supply-demand balance in the international oil market changes greatly as aresult of reactions to the low crude oil prices, the prices would rise back to around $80 per barrel in2020.
The shadowy aspects of low oil prices as pointed out by Dr. Birol were also interesting.
Surely, low oil prices bring about economic benefits to net oil importers or consumers such as Japan.
But Dr. Birol noted that oil producing countries would destabilize on deterioration of theireconomies that heavily depend on oil export revenues, that oil demand would expand as low oil
prices weaken energy conservation incentives and that the current oil supply investment cuts would
lead oil importing countries to depend more on the Middle East or the Organization of the Petroleum
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Exporting Countries. He clarified that all these developments would be matters of serious concernthat could eventually threaten energy security for oil consuming countries. Dr. Birol also noted that
although energy security would be usually be given high priority under high oil prices and little
priority under low prices, the significance of energy security should not be discussed according to oil
price levels. I though this point was also very significant.
Second, Dr. Birol’s presentation impressively pointed out the importance of China andIndia for analyzing the international energy situation. As a basic fact regarding China, Dr. Birolnoted that China has become the world’s largest energy consumer and the most important country for
analyzing international energy problems after its substantial energy demand expansion over the past
more than 10 years. Based on this fact, he pointed out that China’s energy demand growth isdecelerating on an economic slowdown under the recent “New Normal” and that there emerged adeviation between its economic growth and energy or electricity demand growth. Dr. Birolreemphasized that China’s future economic and energy trends would continue to influence globalenergy and environmental problems. He also used an analysis in the WEO to explain how great
India’s medium to long-term growth potential would be amid China’s economic growth slowdown.
Interestingly, he noted that India’s future growth would become a new key to influence the world.
Dr. Birol also raised various interesting problems including the significance of the Paris
agreement at the 21st Conference of Parties to the United Nations Framework Convention on
Climate Change, its impacts on the future world energy mix and key roles of energy conservationand non-fossil energy sources (including nuclear and renewable energy) under the impacts. But thethird point that attracted my attention was his suggestion of three pillars for the IEA’s modernization
and relevant expectations on Japan.
Explaining the three pillars, Dr. Birol noted (1) that the IEA should open its door wider todeveloping and emerging countries, (2) that the IEA should give greater or new priority to energy
security including gas security and (3) that the IEA should focus on clean energy and take leadershipin enhancing energy conservation efforts internationally. The three pillars indicate the path in which
the IEA should enhance various initiatives based on the present international energy situation and its
future changes. Particularly, the first pillar indicated that Dr. Birol was strongly conscious of opening
the door to and enhancing cooperation with Asian emerging and developing countries including
China, India and the members of the Association of Southeast Asian Nations.
Impressively, Dr. Birol pointed out that Japan is playing a key role in IEA’s
implementation of the three pillars and that great expectations are placed on Japan’s enhancement ofsuch role and deeper cooperation with the IEA. The remark may be based on his recognition thatJapan is important for all areas including cooperation with Asian countries, gas and LNG security,
clean energy development and energy conservation. Dr. Birol indicated his great expectation thatJapan, as the chair of next year’s Group of Seven summit, would raise key energy challenges for2

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discussions and demonstrate its leadership role in the discussions. I felt that Dr. Birol believed it
would be important for Japan to take firm steps regarding energy policies and strategies to meet theexpectations. It was interesting that Dr. Birol clarified the IEA’s basic policy of promoting
cooperation and collaboration with Japan in taking energy initiatives. As far as Japan is required toimplement policies based on accurate, objective analyses and decisions in addressing thefast-changing domestic and international energy situations and problems, it is important for Japan toeffectively enhance cooperation with international organizations such as the IEA.

Contact: report@tky.ieej.or.jp
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