The world is experiencing 'the first true global energy crisis'

Dr. Fatih Birol, Executive Director of the International Energy Agency, speaks at the 15th International Energy Week in Singapore on October 25. Photo: Reuters

IEA Executive Director Fatih Birol told the Global Energy Week in Singapore that increased LNG imports into Europe amid the Ukraine crisis and the possibility of China's renewed fuel demand will tighten the market with only 20 billion cubic metres of new LNG capacity coming online next year.

At the same time, according to Mr. Birol, the decision by the Organization of the Petroleum Exporting Countries (OPEC) and its allies, also known as OPEC+, to reduce production by 2 million barrels per day is a "risky" decision in the context that the IEA witnessed global oil demand growth of nearly 2 million barrels per day this year.

“This is particularly risky because some economies around the world are on the verge of recession, if we are talking about a global recession... then I find this decision really regrettable,” he said.

Sharp increases in global prices for many energy sources, including oil, natural gas and coal, are creating headwinds for consumers who are already coping with rising inflation for services and food. Higher prices and the prospect of rationing pose a threat to consumers in Europe as they head into the northern hemisphere winter.

According to Mr Birol, Europe can get through this winter with some difficulty, if the weather remains mild. “Unless we have an extremely long and cold winter, unless there are any surprises to what we have seen, such as the Nord Stream pipeline explosion, Europe will get through this winter with some economic and social impact,” he added.

Mr. Birol affirmed that, for oil, consumption is expected to increase by 1.7 million barrels/day in 2023, so the world still needs Russian oil to meet demand.

The G7 countries have proposed a mechanism that would allow emerging countries to buy Russian oil but at a lower price to limit Moscow's revenue after the conflict in Ukraine.

Energy security promotes renewable energy development

An LNG ship is towed to a thermal power plant in Futtsu, east of Tokyo, Japan in 2017. Photo: Reuters

The energy crisis could be a turning point to accelerate the adoption of clean energy sources and create a safe and sustainable energy system, the head of the IEA said. “Energy security is the number one driver of the energy transition,” Birol said, as countries look to energy technologies and renewables as solutions.

It is known that the IEA has just reviewed and increased its forecast for renewable energy capacity growth in 2022 to 20%/year compared to the previous 8%, when nearly 400 gigawatts of renewable energy capacity is being added this year.

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