2023-10-28 04:00:21
According to Fatih Birol, oil companies banking on continued growth are making a dangerous bet. The head of the International Energy Agency (IEA) predicts a shortage, not of their reserves, but of their customers. In the fairly near future.
“For the first time, Peak fossil fuel consumption is in sight.” This is the message that Fatih Birol wanted to send last Wednesday to hand-picked guests at the Brussels business club The Merode. The Friends of Europe think tank met there for its meeting dedicated to energy. The head of the International Energy Agency (IEA) presented the latest “World Energy Outlook”, which is nothing less than the sector’s bible which describes, each year, the “evolution of the global energy mix through detailed scenarios. “Even without changes to current policies, the global energy landscape will be very different in 2030 from what it is today.”a souligné Fatih Birol.
This is the same “message of hope” that the affable Turk will deliver to the heads of state and government during the UN climate summit COP28 to be held in Dubai at the end of November. “In my view, the biggest challenge for the summit participants will be to overcome the lack of international cooperation that exists today due to the geopolitical context.”
“Renewable energy is now ruling the game.”
While this “energy bible” provides important guidance to policy makers around the world, IEA estimates are sometimes greeted with some skepticism in the sector. Thus, the announced drop in demand for coal, gas and especially oil during this decade is seen by some as “wishful thinking”. She is in any case a thousand miles from the projections of OPEC (the oil producing countries) and the oil majors who, as evidenced by recent M&A mega-deals, continue to bet fortunes on continued growth in oil demand.
The Chevron boss believes that you live in a world of scenarios, while in the real world, the demand for oil will continue to increase for a long time.
Our data does not come from the imagination of the IEA. Three years ago, for example, one in 25 cars sold worldwide was electric. This year, one in five cars will be electric, and almost half in 2030. By then, more heat pumps and electric heaters will also be sold than fossil fuel boilers. Ten years ago, 70% of the world’s electricity came from fossil fuels. Today, we are at 60% and by 2030, this share will fall to 40%. Renewable energy now rules the game.
“The bosses of the oil majors, instead of talking to each other in isolation, would do better to also talk with car manufacturers, renewable energy producers and consumers.”
Of course, I understand the point of view of the oil companies, for whom billions of dollars are at stake. But I think that their big bosses, instead of talking to each other in isolation, would do better to also talk with the car manufacturers, producers of heat pumps and renewable energy, and consumers. They will understand how quickly everything changes.
Is the situation really changing so quickly? Look at the current difficulties of the wind energy sector.
Profitability is certainly a challenge, but I don’t think it’s a structural problem. It’s onlyan accident.
“I see a very bright future for investors in renewable energy.”
I see a very bright future for investors in renewable energy. The potential is there, government policies are in place and costs are falling. There may be occasional hiccups, but the trend is very clear. Meditate on this concrete example: of all electricity production capacities built in the world, more than 80% were already renewable this year.
What will be the consequences of the decline of fossil fuels?
The peak of fossil fuels this decade will constitute a tipping point in energy history. But this does not mean that coal, oil and natural gas will disappear immediately. Simply, fossil fuels will turn the page on growth.
After the peak, will demand for oil and gas still remain high for decades?
With unchanged policies, global CO2 emissions are expected to peak in 2025. This is good news, but it is not enough. A reduction in emissions is necessary. If fossil fuel consumption remains high following the peak, global temperatures will continue to rise. With current policies, we are heading towards a temperature rise of 2.4°C by the end of the century. Much more will have to be done to limit this increase to 1.5°C, as we wish.
Does the war between Israel and Hamas change the situation?
The current geopolitical crisis in the Middle East might lead to an oil shock. A third of global oil exports come from this region. The oil markets are therefore on edge. I fear that a major oil exporting country is directly involved. I also hope that the situation in the Middle East will not cause us to lose sight of Ukraine or the climate crisis.
Last winter was mild in Europe. How do you envisage the gas supply for this winter?
Gas stocks are at a record high. We now know how to better manage the supply problem.
“I appreciate the decision of the Belgian government to reconsider its nuclear energy policy.”
More I cannot yet say with certainty that we are out of the danger zone. If we have a very cold winter, gas stocks will decrease significantly. In addition, if Russia completely interrupts its gas deliveries, part of which still goes to Europe, supply will become difficult this winter.
I therefore appreciate the decision of the Belgian government to reconsider its nuclear energy policy. This energy is making a comeback all over the world, even in Germany. Given the challenges we face regarding energy supply and climate, I plead for maintaining nuclear energy in our energy mix.
Will Europe’s gas supply remain difficult?
Numerous projects for new LNG production capacities (for the transport of liquefied gas by boat, Editor’s note.) are emerging, particularly in the United States and Qatar. The quantity of liquefied gas that will thus be available from 2025 will represent nearly 50% of the current global supply. This will put downward pressure on gas prices. In the second half of the decade, we will move from a gas market where the power was in the hands of sellers to a market dominated by buyers.
For its part, should the oil sector make more efforts?
Many oil and gas industry bosses are making speeches regarding clean energy solutions. They say they want to be part of the solution, but that doesn’t correspond to the amounts they are actually investing in this area. Of all investment in the oil and gas industry, only 4% is dedicated to clean energy solutions, compared to 96% to traditional fossil energy sources. They must correct the situation.
What role will China play in the transition?
China has been the main driver of global growth in energy consumption over the past decade. But the country is transforming and rebalancing its economy. The growth rate slows down. We think that China’s energy consumption will peak around 2025.
“What happens in China will be crucial to understanding how global energy markets will evolve.”
China will become a champion of clean energy. Today, the country is already number one in solar energy, wind energy, hydropower, electric cars and the construction of new nuclear power plants. What happens in China will be crucial to understanding how global energy markets will evolve.
Will you go to the Dubai climate summit with an optimistic message?
For me, the Dubai climate summit will be as important as that of 2015, with the Paris climate agreementt. At the time, the greats of this world wanted to collaborate. Today, the geopolitical context makes things much more difficult. But the big advantage Todayis that different technologies like solar panels, wind power and electric cars became competitive and began strong growthe. This was not the case eight years ago in Paris.
The profile
Fatih Birol (65 ans) est executive director of the International Energy Agency (IEA) since 2015.
This Turkish doctor in energy economics first worked for the OPEC oil cartel in Vienna. In 1995 he joined the IEA as an analyst. He gradually rose through the ranks, first becoming chief economist and then director just before the start of the Paris climate summit.
Fatih Birol is known as an energy authority. He was on the list of Time’s 100 most influential people of 2021. He was named Energy Person of the Year 2017 by the Financial Times and chairs the Energy Advisory Council at the World Economic Forum (WEF) in Davos.
Key phrases
- “The global energy landscape will be very different in 2030 than it is today. Fossil fuels will turn the page on growth.”
- “Renewable energy is now dominating the game. I see a very bright future for their investors.”
- “The bosses of the oil giants, instead of talking to each other in isolation, would do better to also talk with car manufacturers, heat pump producers, renewable energy producers and consumers.”
- “The current geopolitical crisis in the Middle East might lead to an oil shock.”
- “I appreciate the decision of the Belgian government to reconsider its nuclear energy policy.”
1698468548
#Fatih #Birol #AIE #energy #market #change #decade
