Rising oil prices could help accelerate climate action by accelerating the shift to electric vehicles, but it would come at the expense of the economic recovery from the Covid-19 pandemic, according to the global energy watchdog.
Global demand for crude increased by an average of 3.2 million barrels per day (b / d) compared to the previous month, but the return of oil production has not been able to keep pace, causing an increase constant of market prices.
The International Energy Agency (IEA) warned that oil prices, which rose two-thirds this year to highs of $ 77 a barrel earlier this month, could rise further and cause volatility in the market unless large oil producers oil pump more barrels.
“While prices at these levels could increase the pace of electrification of the transport sector and help accelerate energy transitions, they could also slow economic recovery, particularly in emerging and developing countries,” the IEA said.
American drivers are already facing record prices to fill their tanks due to rising oil market prices. The price per gallon hit an all-time high of $ 3.14 on Monday, and analysts warned that the price could rise to $ 5 a gallon.
As a result, the cheaper price of operating an electric vehicle may encourage more motorists to make the switch earlier than planned, driving efforts to reduce transportation emissions. But higher fuel prices could also fuel cost inflation in the world economy, particularly in developing countries.
The Paris-based agency used its influential monthly oil market report to warn OPEC members and their allies (OPEC +) that without success in their talks on oil production, the market “would significantly tighten as the demand to recover from the Covid-induced drop last year. “
Oil demand fell at its steepest pace since World War II after the coronavirus outbreak, from 100 million barrels of oil a day to just over 91 million barrels. But demand could recover to its fastest rate on record to reach pre-pandemic levels by the end of 2022, according to a previous IEA report.
OPEC + talks to determine how quickly to increase the cartel’s oil production after last year’s historic production cuts collapsed last week, meaning that the cartel’s output is expected to rise by just 400,000 b / d since August.
Meanwhile, the IEA has forecast that between July and September oil demand could rise to 3.3mb / d more than the previous quarter.
In Europe, demand for air transport grew “significantly” in June, boosting demand for transportation fuels. The number of scheduled seats increased 52% in the UK compared to May, according to data provider OGA, with similar increases recorded in France (46%), Germany (44%) and Spain (53%).
The mismatch between rapidly increasing oil demand and a slower rate of oil production could lead to oil market volatility if there is uncertainty about future OPEC + oil supply. Ultimately, volatility in the market “does not help ensure orderly and safe energy transitions, nor does it benefit either producers or consumers,” the IEA said.
George is Digismak’s reported cum editor with 13 years of experience in Journalism