World is in its ‘first truly global energy crisis,’ says IEA chief

According to the head of the International Energy Agency (IEA), the world is currently experiencing "the first truly global energy crisis" as a result of tightening markets for liquefied natural gas (LNG) and major oil producers reducing supply.

According to IEA Executive Director Fatih Birol, only 20 billion cubic meters of new LNG capacity will enter the market in 2019, which will result in tighter market conditions due to rising LNG imports to Europe amid the Ukraine crisis and a potential rebound in Chinese demand for the fuel.

The Organization of the Petroleum Exporting Countries (OPEC) and its allies, known as OPEC+, recently decided to cut 2 million barrels per day (bpd) of output, which Birol described as a "risky" decision given that the IEA anticipates a rise in global oil demand of nearly 2 million bpd this year.

"If we're talking about the global recession, it's particularly risky because several economies worldwide are on the verge of one.

This choice, in my opinion, was really regrettable "said he.

Consumers are suffering from soaring global energy prices, including those for coal, natural gas, and oil, at a time when they are already contending with rising food and service inflation. Consumers in Europe face a potentially dangerous situation as they get ready for the coming winter in the Northern Hemisphere because of the high prices and potential for rationing.

If the weather is mild, Birol said, Europe might survive this winter, albeit somewhat battered.

"Europe should go through this winter with some economic and social bruises unless we will have an extremely cold and long winter, unless there will be any surprises in terms of what we have seen, for example, the Nordstream pipeline explosion," he continued.

In order to meet global demand for oil, which is predicted to increase by 1.7 million bpd in 2023, Birol said that Russian oil will still be needed.

In order to limit Moscow's income in the wake of the Ukraine War, the G7 nations have proposed a mechanism that would allow emerging nations to purchase Russian oil but at lower prices.

According to Birol, there are still a lot of details to work out for the plan, and important oil-importing countries will need to support it.

According to a U.S. Treasury official who spoke to Reuters last week, it is reasonable to assume that if Moscow chooses to ignore the price cap mechanism, up to 80% to 90% of Russian oil will continue to flow outside of it.

"This, in my opinion, is advantageous because the world currently needs Russian oil to continue entering the market. A good and encouraging level to meet the demand is between 80% and 90%, "said Birol.

Although there is still a sizable amount of strategic oil reserves that can be used in the event of a supply disruption, he added that another release is not currently planned.

ENERGY SECURITY DRIVES RENEWABLES GROWTH

According to Birol, the current energy crisis may mark a turning point in the development of clean energy sources and a secure and sustainable energy infrastructure.

According to Birol, countries view energy technologies and renewables as a solution, and this is why "energy security is the number one driver (of the energy transition)".

With nearly 400 gigawatts of new renewable power capacity added this year, the IEA has increased its prediction of renewable power capacity growth in 2022 to a 20% year-over-year increase from an earlier 8% increase.

According to Birol, many nations in Europe and elsewhere are speeding up the installation of renewable capacity by reducing the licensing and permitting procedures to replace the Russian gas.