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

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

Rising LNG imports to Europe amid the Ukraine crisis and a potential increase in Chinese appetite for the fuel will tighten the market, with just 20 billion cubic meters of new LNG capacity coming on stream next year, IEA Executive Director Fatih Birol said in Singapore. International Energy Week.

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 also a “risky” decision as the IEA views global oil. Demand growth of almost 2 million bpd this year, Birol said.

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

Rising global prices across a range of energy sources, including oil, natural gas and coal, are hitting consumers while already coping 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.

Europe may survive this winter, albeit a bit disrupted, if the weather remains mild, Birol said.

“Unless we have an extremely cold and long winter, unless there are surprises in terms of what we’ve seen, like the Nordstream pipeline explosion, Europe should survive this winter with some economic and social bruises,” he added.

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

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The G7 countries proposed a mechanism that would allow developing countries to buy Russian oil, but at lower prices, to limit Moscow’s income from the war in Ukraine.

Birol said the scheme still had many details to fine-tune and would require the buy-out of major oil-importing countries.

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

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

While there is still a huge amount of strategic oil reserves that can be tapped during supply disruptions, further release is not currently on the agenda, he added.

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ENERGY SECURITY DRIVES THE GROWTH OF RENEWABLE RESOURCES

The energy crisis could be a turning point for the acceleration of clean sources and for the creation of a sustainable and secure energy system, Birol said.

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

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

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

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

Our standards: Thomson Reuters Trust Principles.

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