Energy prices could spike again this winter, the head of the International Energy Agency has warned.
Speaking to the BBC, Fatih Birol said that if China’s economic recovery from the pandemic accelerated later this year and the winter in the northern hemisphere was harsher than last year’s, prices would rise.
If that happens, governments would need to step in again and subsidize energy consumption, he said.
"In a scenario where the Chinese economy is very strong, buys a lot of energy from the markets, and we have a harsh winter, we may see strong upward pressure under natural gas prices, which in turn will put an extra burden on consumers," Birol told the BBC.
What’s more, Birol said he could not rule out blackouts in the winter, which could be “part of the game”.
Last month, the head of Germany’s energy regulator issued a similar warning for winter 2023/24. Speaking to local media, Klaus Mueller said the energy crisis in Europe was not over yet and if the winter was cold, supply could fall short of demand.
"When it comes to storage (tank) filling, we are now at a different level to last year ... But the biggest factor remains the weather," Mueller said in early June, as quoted by Reuters. "The energy crisis is not over yet," he added.
China remains the single biggest factor that will influence energy prices for the remainder of the year. So far, its economic recovery has been bumpier than initially expected, and this has led to lower energy prices on world markets.
But industrial activity might yet accelerate with the help of government support, and this would push prices higher for all buyers.
Add to this the doubtful likelihood of a repeat of last year’s unusually warm winter and the potential for energy price—and supply—uncertainty rises significantly.
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By Irina Slav for Oilprice.com
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Moreover, what is delaying the spike has nothing whatsoever to do with global oil demand and market fundamentals or with China’s economy.
The fundamentals are robust and China’s economy is breaking records in crude oil imports and growing the fastest in the world. It is has everything to do with US banking difficulties and fears that further hikes by the US Federal Bank could cause of one or two more US commercial banks to collapse
Dr Mamdouh G Salameh
International Oil Economist
Global Energy Expert