Fatih Birol, the head of the International Energy Agency (IEA) has indicated that the world may well be facing its biggest oil supply shock in decades as a result of Russia’s appalling aggression Against Ukraine.
Birol urged countries to reduce oil demand now, to avoid the risk of a crippling oil crunch.
As a result of this the International Energy Agency has called for global economies to drive less, fly less and work from home more in order to help reduce oil demand amid the ‘potential emergency the world is facing.
The agency, in its 10-point plan to cut oil use, stated that the measures proposed could reduce oil demand by 2.7 million barrels a day within the next four months.
Embedded within the IEA’s 10-point plan include:
Reducing speed limits on highways by at least 10 km/h, working from home up to three days a week where possible, observing car-free Sundays in large cities and making public transport cheaper while encouraging micro-mobility, walking and cycling.
Other aspects of the 10-point plan are: Alternate private car use in large cities, car sharing and practices that decrease fuel use. Promotion of efficient use of freight trucks and goods delivery; supporting high-speed and night trains to planes where possible, avoiding business travel when alternatives exist and hastening adoption of electric and more efficient vehicles.
Russia’s invasion of Ukraine has thrown global commodity markets into turmoil. The global oil market, in which Russia is a major force, is one of the most heavily affected.
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Significant strains are showing in the global oil market, compounding difficulties in natural gas markets and creating a looming emergency for global energy security. Oil prices have swung violently since the Russian invasion, with the global benchmark nearing the all-time high of $150 per barrel at times, putting the still fragile and uneven global economic recovery at risk.
More than half of Russia’s oil exports go to Europe and around 20% go to China, but the market is global, meaning changes in supply and prices affect everyone.
With the United States, United Kingdom and Canada banning imports of Russian oil, the IEA’s latest oil market report on Wednesday identified the potential for a shut-in of 2.5 million barrels a day of Russian oil exports starting from April; but losses could increase should restrictions or public condemnation escalate. A prolonged period of volatility for markets appears likely.
“The increases in prices are being felt everywhere. Even if the price of oil on international markets has not so far risen as high as the all-time record reached in 2008, currency exchange rates mean that the price at the pump is at the highest level ever in some countries.
“With the potential loss of large amounts of Russian supplies looming, there is a real risk that markets tighten further and oil prices escalate significantly in the coming months as the world enters the peak demand season of July and August,” the Agency said.
“The risks are most acute and are already being felt in some cases; in market segments where Russia is a major supplier, such as diesel,” the agency added.
