World is in its ‘first truly global energy crisis’ – IEA’s Birol

SINGAPORE, Oct 25 (Reuters) – Firming liquefied natural gas (LNG) markets around the world and supply cuts from major oil producers have put the world in the middle of “the first real global energy crisis”, the head of the International Energy Agency (IEA) said on Tuesday.

Fatih Birol, executive director of the IEA in Singapore, said the increase in LNG imports to Europe in the wake of the Ukraine crisis and a possible increase in China’s appetite for the fuel will tighten the market, as only 20 billion cubic meters of new LNG capacity will enter the market next year. International Energy Week.

Meanwhile, the recent decision by the Organization of the Petroleum Exporting Countries (OPEC) and its allies, known as OPEC+, to cut production by 2 million barrels per day (bbl) is a “dangerous” decision, as the IEA sees world oil. Birol said that the increase in demand this year is close to 2 million barrels.

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“(It’s) particularly dangerous because several economies around the world are on the brink of recession, if we’re talking about a global recession… I found this decision really unfortunate,” he said.

Rising global prices for a range of energy sources, including oil, natural gas and coal, are squeezing consumers, along with rising food and service inflation. High prices and the possibility of tariffs are potentially dangerous for European consumers as they prepare for the Northern Hemisphere winter.

Birol said Europe could get through this winter, albeit somewhat damaged, if the weather remains mild.

“If we don’t get an extremely cold and long winter, if there are no surprises in terms of what we’ve seen, like the Nord Stream pipeline explosion, Europe should go through this winter with some economic and social damage,” he said.

Birol said oil consumption is expected to increase to 1.7 million barrels per day in 2023, so the world will still need Russian oil to meet demand.

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The G7 countries proposed a mechanism that would allow developing countries to buy Russian oil at a lower price, limiting Moscow’s income in the wake of the Ukraine conflict.

Birol said the plan still has many details to iron out and requires buy-in from major oil importing countries.

A US finance official told Reuters last week that it was not unreasonable to believe that up to 80 to 90 percent of Russia’s oil would continue to flow outside the price mechanism if Moscow were to opt out.

“I think it’s good because the world still needs Russian oil to enter the market. 80-90% is a good and encouraging level to meet demand,” said Birol.

While there are still large amounts of strategic oil reserves that could be tapped in the event of a supply cut, another release is not on the agenda, he added.

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Birol said that the energy crisis can be a turning point for the acceleration of clean sources and the formation of a stable and secure energy system.

“Energy security is the number one factor (of the energy transition),” Birol said, as countries look to energy technologies and renewable sources as solutions.

The IEA has revised its forecast for renewable electricity capacity growth to 20% in 2022, up from 8% previously, with around 400 gigawatts of renewable capacity added this year.

Birol said many countries in Europe and elsewhere are accelerating the installation of renewable energy by reducing permitting and licensing processes to replace Russian gas.

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Reporting by Florence Tan, Muyu Xu and Emily Chow; Edited by Jacqueline Wong and Christian Schmollinger

Our Standards: The Thomson Reuters Trust Principles.


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