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

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

Rising LNG imports to Europe amid the Ukraine crisis and a possible rebound in China’s appetite for the fuel will strengthen the market as only 20 billion cubic meters of new LNG capacity will come on the market next year, he said. IEA Executive Director Fatih Birol during Singapore. International Energy Week.

At the same time, the decision made by the Organization of the Petroleum Exporting Countries (OPEC) and its allies, known as OPEC+, to cut 2 million barrels per day (bpd) of output is a “risky” decision as seen by the IEA global oil. demand growth close to 2 million bpd this year, Birol said.

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“(It’s) particularly dangerous because some economies around the world are on the verge of recession, if we’re talking about the global recession … this decision was very unfortunate for me,” he said.

Global prices are rising across several energy sources, including oil, natural gas and coal, affecting consumers as they already deal with rising food and services inflation. The high prices and the possibility of rationing could be dangerous for European consumers as they prepare to enter the Northern Hemisphere winter.

Europe may make it through this winter, albeit a bit battered, if the weather stays mild, Birol said.

“If we do not have a very cold and very long winter, unless there are any surprises in terms of what we have seen, such as the Nordstream pipeline explosion, Europe should go through this winter with some economic and social bruises ,” he said.

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 mechanism that would allow developing nations to buy Russian oil but at lower prices to limit Moscow’s income after the war in Ukraine.

Birol said the scheme still has many details to work out and will require the buy-in of major oil importing nations.

A US Treasury official told Reuters last week that it is not unreasonable to believe that up to 80% to 90% of Russian oil will continue to flow outside the price cap mechanism if Moscow seeks to break it.

“I think this is good because the world still needs Russian oil to flow into the market at the moment. A level of 80%-90% is good and encouraging to meet the demand,” said Birol.

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

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ENERGY SECURITY DRIVES INNOVATIVE GROWTH

The energy crisis could be a turning point to accelerate clean sources and to form a sustainable and secured energy system, said Birol.

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

The IEA has revised the forecast for renewable power capacity growth in 2022 to a 20% year-on-year increase from 8% previously, with nearly 400 gigawatts of renewable capacity being added this year.

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

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

Our Standards: The Thomson Reuters Trust Principles.

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