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Energy Transition Threatens Oil Producers: IEA

Countries dependent on oil revenues for much of their budgets will become increasingly vulnerable to problems caused by the global energy transition, the head of the International Energy Agency, Fatih Birol, told Bloomberg in an interview.

The world will still need oil this year and next, and for years to come, but it will need less and less of it, Birol said, noting that government regulation was instrumental in cementing the global course to a more renewable energy future.

Birol’s comments came after the IEA reported it will later this year release the first comprehensive roadmap to net zero emissions by 2050. The roadmap, according to the report, “will set out in detail what is needed from governments, companies, investors and citizens to fully decarbonise the energy sector and put emissions on a path in line with a temperature rise of 1.5 degrees Celsius.”

“The energy that powers our daily lives and our economies also produces three-quarters of global emissions. This means our climate challenge is essentially an energy challenge. The IEA is determined to tackle that challenge and lead global clean energy transitions,” Birol said in the release.

In Bloomberg’s interview, the head of the agency noted that without sufficient government commitment, however, oil demand will continue rising as it did before the pandemic. He pointed to China as a case in point: China’s demand for oil is already higher than it was before the pandemic, Birol said, because the government in Beijing has made no substantial change in its energy priorities.

Over the short term, however, the world may need more oil than it is currently producing, the official also said, noting that U.S. shale as one possible source of oil to fill the gap left by other producers. He added that “a big chunk” of U.S. shale oil is profitable at current WTI prices.

By Irina Slav for Oilprice.com

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  • Mamdouh Salameh on January 13 2021 said:
    In the absence of diversification, the economies of the oil-producing countries particularly the Arab Gulf producers whose budgets are highly dependent on the oil revenue could be adversely affected in the future. This is because they will be restricted by how much they can expand their oil production capacity and also by oil prices and not by global energy transition as the head of the International Energy Agency (IEA) Fadil Birol surmised.

    A global energy transition means a transition from hydrocarbons such as coal to renewables in electricity generation. Furthermore, any transition can’t achieve much without major contributions from both natural gas and nuclear energy. It will never affect the demand for oil since oil will continue to be used overwhelmingly in global transport, petrochemicals and plastics. Even the introduction of 300 million of electric vehicles (EVs) by 2040 will only slightly decelerate the global oil demand.

    Global oil demand will continue to increase year after year albeit at a slightly reduced rates well into the future but there will neither be a post-oil era nor a peak oil demand either throughout the 21st century and probably far beyond. Moreover, the notion of zero emissions by 2050 or even far beyond is an illusion.

    Dr Mamdouh G Salameh
    International Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Business School, London

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