OPEC Voices Encouragement After IEA Affirms Support for Oil Security
03.16.2024 By Tank Terminals - NEWS

March 16, 2024 [Rigzone]- The Organization of the Petroleum Exporting Countries (OPEC) on Wednesday expressed encouragement after a commentary from the International Energy Agency (IEA) telling the globe to ensure petroleum supply while transitioning to a clean energy future.

 

The development marks an easing of hostilities between the multi-governmental body and OPEC. The two clashed ahead of COP28 last year over the IEA’s claim that demand for fossil fuels could peak by 2030.

In the commentary published Monday the IEA said while its work on energy security has expanded to include “the emerging security dimensions of clean energy transitions”, it has “a firm commitment to oil security”.

“An enduring focus on oil security is a consequence of the continued need for oil to fuel cars, trucks, ships and aircraft, as well as to produce the petrochemicals necessary to manufacture countless everyday items”, wrote IEA energy security analyst Ronan Graham and IEA energy security researcher Ilias Atigui in the commentary.

OPEC highlighted this statement, saying, “These messages have been strongly voiced by OPEC for many years, and we will continue to reiterate that energy security, energy affordability and reducing emissions need to go hand-in-hand, as we look to an all-energies, all-technologies and all-peoples approach to energy transitions”.

That reasserted the statement of the Gulf states-dominated group for the 28th Conference of the Parties—the decision-making body of the UN Framework Convention on Climate Change—held November 30–December 12 in Dubai. While OPEC said in its COP28 statement delivered December 9 that the transition needs an “all-energies approach”, the annual gathering nonetheless agreed to chart “the beginning of the end of the fossil fuel era”, per the words of a COP28 statement December 13. The COP28 agreement, though, did not specify a timeline.

“As nearly 200 countries recognized at the COP28 climate change conference in Dubai in December, the world needs to transition away from fossil fuels if it is to avoid the worst impacts of global warming”, the IEA commentary said. “However, while the world’s dependence on oil is lessening, it remains deep-rooted, so supply disruptions can still cause significant economic harm and have a substantial negative impact on people’s lives”.

However, the IEA maintained, “While global oil consumption reached a record high in 2023, oil dependence is set to weaken further in many parts of the world in the coming years”.

“The shift to a clean energy economy is gathering pace, with electric vehicle sales soaring, energy efficiency improving, and other clean energy technologies advancing rapidly”, the commentary added.

“Consequently, a peak in global oil demand is in sight before the end of this decade, based on today’s policy settings”, the IEA wrote, before noting: “However, the threat posed by oil supply disruptions will not disappear anytime soon”.

“Even once demand starts declining, oil will remain an important part of the global energy mix for some time”, the IEA said. “There is also good reason to believe that oil supply disruptions are even more likely to occur in the coming decades than they are today. This is due to an elevated risk of supply-demand imbalances, increasing supply concentration for both crude oil and oil products, a highly uncertain geopolitical outlook, and a plethora of additional risks including the growing threat of cyberattacks and the increasing frequency of extreme weather events”.

The IEA went on to acknowledge that uncertainty around how quickly demand falls creates risks on investment decisions, which in turn threaten oil supply.

It also warned that while some parts of the world progress in clean energy transition, the lost oil production capacity in these parts could be absorbed in some OPEC countries. “Transitions could be destabilizing for producer economies that fail to diversify away from their high dependence on hydrocarbon revenues”, the commentary warned. “Therefore, a higher concentration of global oil supply among a smaller group of countries could lead to heightened concerns about security of supply, with disruptions potentially having even greater impacts than if they were to occur today”.

While the IEA concluded that “promoting the uptake of clean energy solutions is the most effective means for any government to enhance energy security”, it stressed “oil consumption will not vanish overnight”.

IEA ministers already affirmed the importance of oil to the global economy in their meeting last month, according to the commentary.

OPEC in its response to the commentary urged all oil industry stakeholders “to focus on and contribute to oil security, in all facets, given the immense benefits that oil, and the petroleum products derived from it, continue to provide to people and nations across the world”.

OPEC warned that “the stakes are high” around oil security, warranting “clear and consistent messaging from all energy stakeholders on how vital oil and energy security is for the health of the global economy and the welfare of billions around the world”.

 

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