Thursday, June 15, 2023

In the second part of the year, oil prices could start to rise

 The International Energy Agency (IEA)'s executive director, Fatih Birol, was in New Delhi for a string of G20 meetings. A well-known energy expert, Birol, told TOI in an interview that China's economic performance will determine how oil prices behave. Excerpts:

After Saudi Arabia's most recent voluntary output reduction, where do you see oil prices going?

Prices may rise in the second half of the year when, from my perspective, demand may be higher and additional production from non-Opec nations will be lower. As a result, a deficit and price increases may occur. China's economic performance presents the greatest uncertainty for me. Prices won't be as strong if the second half's performance is weaker. We and others believe that prices will rise along with the supply cost if it bounces back. In any case, importing nations should not ignore production cuts at a time when the global economy is quite fragile.

How do you see the expansion of oil demand?

Again, more than 2 million barrels per day (additional demand) may arrive if China's economy performs as predicted by the Chinese government and major economic institutions (around 5% and above). 60% of this will come from China alone, and 40% from everyone combined. Therefore, it will be contingent on the Chinese economy. However, demand remains robust this year as a result of the rebound from the Covid. Global oil demand will decrease in the coming years, primarily as a result of the exponential growth of transportation electrification.

Is the global energy flow tectonic shift that occurred after Ukraine going to continue? because the war will eventually end.

Natural gas, for instance, is one area where the change is certain to continue. Before February 24, Russia exported the most natural gas. Europe was by far the largest customer. Additionally, they were using pipelines to ship natural gas to Europe. The Europeans won't, at least not for natural gas, return to Russia. Numerous Europeans have taken numerous steps, discovered LNG, and promoted renewable energy. We have witnessed the return of nuclear power in some nations. It cannot be changed in natural gas.

According to the oil market report from the International Energy Agency, the transition will be accelerated beginning in 2020 due to the turmoil in the oil market. However, Big Oil is back to talking about increasing production on the ground, and abandoned coal power plants are being revived. How can this be explained?

Even in small amounts, international oil companies will not be the primary investors in clean energy. It originates everywhere else. When you look at international oil companies, their revenues last year were $4 trillion, which is twice as much as they make in a typical year. Clean energy received only 5 percent of this money. However, there is increasing investment in clean energy. When we look at global energy spending this year, $1 trillion was spent on fossil fuels. 7 trillion dollars were invested in clean energy. In addition, global investments in solar power, which are crucial to India, outpaced investments in oil production. This alone, in my opinion, is a very good sign that investments in clean energy are moving more quickly than many people realize.

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