Tension between International Energy Agency and OPEC
The head of the International Energy Agency (IEA), Fatih Birol, said that the Organisation of Petroleum Exporting and Producing Countries (OPEC) should take into account that a rise in oil prices could further slow down the global economy. In the middle of this month, the IEA criticised the decision to cut oil production, warning that it could lead to a shortfall in the market that would increase prices and affect consumers. In addition, Birol considered that investments in oil should be reduced and clean technologies should be developed to combat climate change.
For his part, OPEC Secretary General Haitham al-Ghais declared that inflation does not necessarily depend on them reducing production. Moreover, he has pointed out that the rise in oil prices could, on the contrary, come from the IEA encouraging people not to invest in oil.
According to the Energy Agency, global oil demand this year is on track to rise to a record 101.9 million barrels per day, as China leads an economic surge among developing nations. The Asian country is recovering from the crisis caused by the pandemic and the harsh restrictions imposed. The daily average forecast for 2023 is 2 million barrels per day (mb/d), higher than last year's figure.
A 52.9 mb/d increase in January in global inventories lifted known stocks to nearly 7.8 billion barrels, their highest level since September 2021. Despite solid Asian demand growth, the market has been in surplus for three consecutive quarters.
Still, global oil supply should comfortably outstrip demand in the first half of the year. Today's stock build would ease tensions as the market moves into deficit in the second half of the year, when China is expected to drive global oil demand to record levels. Global demand is forecast to rise by 3.2 mb/d by the end of the year, bringing average growth for the year to 2 mb/d. Matching that increase would be a challenge even if Russia could maintain production at pre-war levels.
The oil market took a big hit during the pandemic, but demand has recovered despite high oil prices since 2022. If the reduction in production takes effect this year at the same time as Chinese demand increases, prices will explode. This could lead more and more consumers, mainly in developed countries, to opt for clean energy.
Governments in the West are increasingly turning to renewable energy, especially in Europe, in the aftermath of the war in Ukraine. The conflict has demonstrated Europe's dependence on fossil fuels.
The new edition of the IEA's Global Electric Vehicle Landscape report shows that more than 10 million electric cars were sold in 2022 and sales are expected to grow by another 35% this year to reach 14 million. Electric cars in the global car market have increased by 14% in 2022 out of the total number of existing vehicles and is expected to increase further to 18% this year.
Oil production is currently responsible for about 40% of methane emissions. If oil prices continue to rise, both citizens and governments in developed countries will need to switch to clean energy, not only to reduce emissions and meet zero emissions targets by 2050, but also to become less and less dependent on scarce resources that can generate instability due to price volatility and dependence on third countries.
