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

SINGAPORE, Oct 25 (Reuters) – A tight global market for liquefied natural gas (LNG) and supply cuts by major oil producers have put the world in the midst of “the first truly global energy crisis,” the head of the International Energy Agency (IEA) said. ) said Tuesday.

Rising imports of LNG into Europe amid the Ukraine crisis and a possible revival in Chinese appetite for the fuel will tighten markets as only 20 billion cubic meters of new LNG capacity will come on stream next year, IEA Executive Director Fatih Birol said in Singapore. International Energy Week.

At the same time, the recent decision by the Organization of the Petroleum Exporting Countries (OPEC) and its allies, known as OPEC+, to cut production by two million barrels per day (bpd) is a “risky” decision as the IEA watches global oil. Demand has increased to 2 million barrels per day this year, Birol said.

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

Rising global prices for many energy sources, including oil, natural gas and coal, are hammering consumers at the same time they are already dealing with rising food and service inflation. High prices and the possibility of rationing are potentially dangerous for European consumers as they prepare to enter the northern hemisphere winter.

If the weather stays mild, Europe could make it through this winter, albeit somewhat battered, Birol said.

“Unless we have a very cold and long winter, as long as there are no surprises in what we’ve seen, for example the Nordstream pipeline explosion, Europe should suffer some economic and social injuries this winter,” he added.

As for oil, consumption is expected to grow by 1.7 million bpd in 2023 so the world will still need Russian oil to meet demand, Birol said.

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The G7 nations have proposed a mechanism that would allow emerging nations to buy Russian oil but at lower prices, limiting Moscow’s revenues after the Ukraine war.

Birol said the plan still has many details and will require the buy-in of major oil-importing nations.

A US Treasury official told Reuters last week that it was not unreasonable to believe that 80% to 90% of Russian oil would continue to flow outside the price cap mechanism if Moscow tried to ignore it.

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

While there are still large amounts of strategic oil reserves that could be tapped during supply disruptions, another release is not currently on the agenda, he added.

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Energy security drives renewable growth

Birol said that the energy crisis could be a turning point for accelerating clean sources and building a sustainable and secure energy system.

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

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

Many countries in Europe and elsewhere are accelerating the installation of renewable capacity by cutting permitting and licensing processes to replace Russian gas, Birol said.

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

Our Standards: Thomson Reuters Trust Principles.

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