Prices for crude oil, the world economy’s most essential commodity, will need until 2020 to recover from the price war unleashed last year by Saudi Arabia, the International Energy Agency said Tuesday.

But while that’s good for energy consumers across the world, it makes them more dependent on a small handful of politically volatile, mainly Middle Eastern, producer countries than at any time since the 1970s, the Paris-based watchdog warned in its closely-watched annual outlook for the world energy market.

Under its base case scenario, the IEA said it expects crude prices to recover to around $80 a barrel by 2020, as the market gradually rebalances by taking high-cost supply out of the market and encouraging higher demand growth. Thereafter, it expects only tepid demand growth for another 20 years, as alternative sources, especially renewables, expand their share in the energy mix.

The promise of $80 oil is a comforting message to western oil companies that have been slashing jobs and investment this year in anticipation of much lower prices. BP Plc (BP) recently outlined plans where it could continue to grow and pay dividends even at an oil price of $60/bbl, while Chevron Corp. (CVX) and ConocoPhillips (COP) last month also announced aggressive cost savings as spot prices headed back below $45/bbl.

U.S. shale producers too, will be happy if the IEA’s base case plays out. If prices recover as it expects, then U.S. tight oil output should rise by 1.5 million barrels a day by 2020 to over 5 million b/d, according to the IEA.

However, it warned that “a substantial decline in output” is likely in the near term if prices remain below $60. And it warned that prices could stay stuck in the $50-$60/bbl range if Middle Eastern producers, notably Iraq and Iran, can create a political climate stable enough to realise the potential of their low-cost reserves–always a big ‘if’, but one that has “a clear pathway” now that sanctions on Iran are set to be lifted.

Oil prices have fallen 10% in the last week as hopes for a quick end to the Saudi-led price war have faded. The benchmark U.S. crude oil future currently trades at just over $44/bbl. Media reports suggest that there is little chance of the Organisation of Petroleum Exporting Countries agreeing to cut its output this year, despite the increasing strain on their budgets. Saudi Arabia is going so far as to borrow on the international capital markets–an option not available to other OPEC members such as Iran and Venezuela.

But as low-cost Middle Eastern producers regain market share, the IEA warned, the risk of over-dependence on the region rises again. And with oil demand falling in developed economies as renewable energy sources gain ground (the IEA predicts combined U.S., Japanese and E.U. oil demand will fall by 10 million b/d by 2040), it’s the rising economies of Asia that will be most acutely exposed.

“A concentration of global supply would be accompanied by elevated concerns about energy security, with Asian consumers… particularly vulnerable,” the IEA said.

By 2040, it expects China’s oil imports to be five times those of the U.S., while India’s will “easily exceed” the European Union’s.