After in recent months crude oil prices have clearly recovered from their COVID-19 slump on steadily increasing demand, Russian Deputy Prime Minister Alexander Novak addressed the much-anticipated decision-making at the upcoming OPEC+ conference set for August and the expectation that it will decide to raise output significantly beyond the current pandemic-induced strategy of gradually releasing more barrels into a strengthening oil market.
Novak said in his Thursday remarks at the St Petersburg International Economic Forum that while it remains "premature" to talk about output decisions for August, he affirmed "The current oil price is good enough for Russia," adding: "Oil prices reflect the balance of supply and demand," and noted it's expected the seasonal oil demand will increase in the third quarter of the year. On Wednesday Brent crude futures touched their highest price since September 2019 at $71.99, with the international benchmark gaining 1.6%, following the day prior the benchmark seeing a rise of almost 3%.
Novak confirmed the upcoming OPEC+ conference will address and finalize oil output for August and other months, while stressing that oil prices shooting too high "may force users to switch to other energy sources." Related: Climate Revolt Against Big Oil May Lead To Surge In Crude Prices
On that front in particular, he blasted current IEA proposals and a "road map" being pushed which in the end could lead to $200 a barrel oil(!):
If the world were to follow the International Energy Agency’s controversial road map, which said investment in new fields would have to stop immediately to achieve net-zero carbon emissions by 2050, "the price for oil will go to, what, $200? Gas prices will skyrocket," Novak said.
And naturally Qatar and Saudi Arabia seconded that dire assessment, vowing to continue expanding their oil and gas facilities while pointing the finger at the climate activists for seeking to starve industry cash. Bloomberg presents the Gulf statements Thursday as follows:
The "euphoria" around the transition to clean energy is "dangerous," Qatar’s Energy Minister Saad Sherida Al Kaabi said at the St Petersburg International Economic Forum in Russia on Thursday.
"When you deprive the business from additional investments, you have big spikes" in prices, he stressed further.
As a reminder, IEA's roadmap set out in the Paris Accords for achieving net zero carbon emissions by 2050 requires reducing emissions as much as possible then offsetting the rest with "carbon removal" plans financed by carbon credits.
However as we've detailed before, with economists expecting global growth to expand at even faster rates thanks to the infusion of stimulus inspired by the pandemic, it follows that energy demand will also increase more quickly. Despite this, many economists and scientists expect that improvements in energy efficiency and the shift to renewables means that global energy demand will be around 8% smaller than it is today in 2050, even though the global economy will be more than twice as large as it is today.
With this in mind, it was perhaps the recent Saudi comments from St. Petersburg which put it best, dismissing the "la-la-land" scenario in an earlier statement...
"Saudi Energy Minister Prince Abdulaziz bin Salman has already dismissed the IEA road map, which would limit the average increase in global temperatures to 1.5 Celsius, calling it a la-la-land scenario," he said according to Bloomberg. "When asked on Thursday if oil is dead, he responded by saying the kingdom is increasing its production capacity."
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The Saudi minister dismissed the IEA roadmap scenario as a "la-la-land" scenario whilst Alexander Novak blasted the IEA proposals saying they could lead to $200 a barrel.
Having achieved a certain level of notoriety, the IEA's zero emission scenario can now be left to die peacefully.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London
The industry is booming again.
Dealing with climate change should be incorporated in the thinking and there will be hard realities on all sides so spare us the radical agenda.