SINGAPORE (Reuters) – The tightening of liquefied natural gas markets around the world and supply cuts by major oil producers have put the world in the middle of “the first truly global energy crisis,” the head of the International Energy Agency (IEA). )) said on Tuesday.
The increase in LNG imports to Europe amid the Ukraine crisis and a possible recovery in China’s appetite for the fuel will narrow the market as only 20 billion cubic meters of new LNG capacity will enter the market next year, Fatih Birol, Executive Director of the International Energy Agency said during Singapore. International Energy Week.
At the same time, the recent decision by the Organization of the Petroleum Exporting Countries (OPEC) and its allies, better known as OPEC+, to cut 2 million barrels per day (bpd) is a “risky” decision as the International Energy Agency sees global oil demand growth approaching, Birol said. Two million barrels per day this year.
“(It is) especially risky because many economies around the world are on the brink of recession, if we are talking about a global recession…I found this decision really regrettable,” he said.
Rising global prices across a number of energy sources, including oil, natural gas and coal, are hurting consumers at the same time they are already dealing with rising food and service inflation. High prices and the possibility of rationing are likely to pose a risk to European consumers as they prepare for winter in the Northern Hemisphere.
Birol said Europe could get through this winter, although it takes a fairly slight hit, if the weather remains mild.
“Unless we have a very cold and long winter, unless there are any surprises in terms of what we saw, for example the explosion of the Nordstream pipeline, this winter Europe should go through some economic and social bruising,” he added.
As for oil, consumption is expected to grow by 1.7 million barrels per day in 2023, so the world will still need Russian oil to meet demand, according to Birol.
The G7 countries proposed a mechanism that would allow emerging countries to buy Russian oil but at lower prices to reduce Moscow’s revenue in the wake of the Ukraine war.
Birol said the scheme still contains a lot of details that need to be ironed out and will require the purchase of major oil importing countries.
A US Treasury official told Reuters last week that it was not unreasonable to believe that as much as 80% to 90% of Russian oil would continue to flow outside the price cap mechanism if Moscow sought to mock it.
“I think that’s a good thing because the world still needs Russian oil to flow into the market at the moment,” Birol said. “80-90% is a good and encouraging level to meet demand.”
He added that while there is still a huge amount of strategic oil reserves that can be exploited during supply disruptions, another release is not currently on the agenda.
Energy security stimulates the growth of renewable resources
Birol said the energy crisis could be a turning point for accelerating clean sources and shaping a sustainable and secure energy system.
“Energy security is the number one driver (of the energy transition),” Birol said, with countries seeing energy technologies and renewables as a solution.
The International Energy Agency has revised its renewable energy growth forecast in 2022 to a 20% year-over-year increase from 8% previously, with nearly 400 gigawatts of renewable energy added this year.
Birol said many countries in Europe and elsewhere are speeding up the installation of renewable energy by cutting off permit and licensing processes to replace Russian gas.
Additional reporting by Florence Tan, Moyo Chu and Emily Chow; Editing by Jacqueline Wong and Christian Schmolinger
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