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

SINGAPORE, Oct 25 (Reuters): Tightening markets for liquefied natural gas (LNG) worldwide and supply cuts by major oil producers have put the world in the midst of a “first global energy crisis”, the head of the International Energy Agency (IEA) said on Tuesday.

IEA Executive Director Fatih Birol said that increased LNG imports to Europe amid the Ukraine crisis and China’s resurgence of appetite for the fuel will further strengthen the market, adding that 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 (bpd) is a “dangerous” decision as the IEA views global oil. Demand growth of 2 million bpd this year, Birol said.

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

Rising global prices across a range of energy sources, including oil, natural gas and coal, are weighing on consumers at the same time they are already grappling with rising food-service inflation. High prices and the possibility of rationing are dangerous for European consumers as they prepare to enter the Northern Hemisphere winter.

If the weather stays mild Europe will get through this winter, albeit a little broken, Birol said.

“Unless we have a very cold and long winter and there are no surprises in terms of what we’ve seen, for example the Nord Stream pipeline explosion, Europe should go through this winter with some economic and social scars,” he added.

As for oil, consumption is expected to increase 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 system that would allow developing countries to buy Russian oil at higher prices to limit Moscow’s revenues in the wake of the Ukraine war.

Birol said the scheme still has many details and will have to be bought in by major oil-importing countries.

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 control system.

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

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

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Energy security drives renewable growth

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

“Energy security is the number one driver (of the energy transition),” Birol said, as countries see energy technologies and renewables as a solution.

The IEA revised its forecast for renewable energy capacity growth to 2022 to 20% year-on-year, up from 8% previously, adding 400 gigawatts of renewable capacity this year.

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

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

Our standards: Thomson Reuters Trust Principles.

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