High energy prices are jeopardizing the world's pandemic recovery, the International Energy Agency's executive director said Feb. 16, calling on OPEC and its allies to hit their oil production targets and for countries not to wield energy as a geopolitical weapon.
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"Today, very high oil and gas prices are putting a huge burden on economies," Fatih Birol said at a symposium hosted by the Riyadh-based International Energy Forum. "With these prices, there is a great risk that the global economic recovery will be much weaker than thought before."
In the oil market, additional crude output from the US, Canada, Brazil and others could provide some eventual price relief, he said.
However, the 23-country OPEC+ alliance, which controls about half of global oil supply, has underproduced its quotas by close to 1 million b/d, according to the IEA's estimates.
"OPEC+ needs to narrow this gap," Birol said.
Several members have struggled to raise production, either due to underinvestment, civil unrest or western sanctions.
In natural gas, Birol said Europe is being affected by "artificial tightness," with Russia cutting its deliveries by 25%. Tensions over the Ukraine crisis, with western countries threatening severe sanctions if Russia invades, have raised concerns that gas supplies could be restricted further.
"My wish is not to politicize the energy," Birol said.
Need for supplies
The IEA has said that for the world to hit its climate targets by 2050, no new investments in oil and gas should be sanctioned. However, Birol said the world will continue to need fossil fuels for years to come.
The IEA was focused on how the energy transition "can be made in an orderly manner, so that on one hand we reach our climate targets, and on the other hand, these producing countries are part of the solution," he said.
OPEC Research Director Ayed Qahtani, without addressing Birol's comments on the OPEC+ supply gap, said geopolitics, supply chain challenges and a lack of upstream oil investment were exacerbating market volatility.
OPEC expects the impact of the omicron variant to fade in the second quarter, boosting demand, said Qahtani, who was standing in for Secretary General Mohammed Barkindo at the symposium.
IEF Secretary General Joe McMonigle also cited the need for more energy investment to tamp down rising prices.
He said global energy consumption had "roared back" to prepandemic levels, while oil and gas industry investment was 23% below 2019 levels. COVID-19 had affected investment flows, but concerns over environmental policies were also creating headwinds for the industry.
Recent rising prices and elevated uncertainty "are all symptoms of a market in flux in a rapidly changing world," he said.