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In an interview with CNBC at the World Economic Forum in Davos, Switzerland, Fatih Birol painted a stark image of the present state of affairs, describing oil costs as being “very excessive.”
“They are dangerous for financial restoration round the world, however particularly in the importing nations in the rising world,” he stated. “It’s a big danger, along with the meals costs being very, very excessive, and I feel that it might nicely set off us, the world … step-by-step to a recession.”
With geopolitical tensions elevated following Russia’s invasion of Ukraine and continued considerations about provide casting a shadow over oil markets, the price of Brent crude presently sits at round $113 a barrel.
“I very a lot hope that the improve coming from [the] United States, from Brazil, Canada this 12 months, [will] be accompanied by the improve coming from the key producers in Middle East and elsewhere,” he stated.
“Otherwise, we have just one hope that we do not have big trouble in the oil markets in summer time, which is hoping … that the Chinese demand stays very weak.”
Chinese oil demand weakened in latest months as the nation imposed quite a lot of stringent lockdowns in a bid to curb the unfold of Covid-19.
If China went again to the traditional oil consumption and oil demand tendencies, “then we are going to have a really troublesome summer time round the world,” Birol stated.
During his interview with CNBC, Birol was additionally requested about the “huge” income being made by quite a lot of hydrocarbon based companies — in addition to exploration corporations — and what needs to be completed with them.
His response illustrated the intricacies of the world vitality transition and the competing challenges that can must be balanced in the years forward.
“In the final 5 years, on common, [the] oil and gasoline business made revenues [of] about $1.5 trillion,” he stated.
“And this 12 months, from 1.5 it’s going to go to 4 trillion U.S. {dollars}, greater than two instances improve in the oil and gasoline corporations’ revenues.”
It was not solely companies that had been being profitable, he added, namechecking nations resembling Saudi Arabia, Iraq, Iran, Russia, Angola and Nigeria.
“Of course, cash ought to go, in my view, to interchange the Russian oil and gasoline, in phrases of the conventional belongings,” Birol stated.
“But I very a lot hope that cash additionally goes to scrub vitality, clear and safe vitality applied sciences, starting from photo voltaic, wind, carbon seize and storage, hydrogen.”
“We are [responding to] … this speedy disaster,” Birol stated. “But our response mustn’t lock in our vitality infrastructure to a horrible world which is way, a lot hotter than right this moment and with quite a lot of issues — excessive climate occasions and so forth.”