Russia’s invasion of Ukraine has not only thrown the global oil market in turmoil, it has forced a reckoning about the outsized role of oil in geopolitics, and Western countries are crafting policies that will guarantee them energy security, with implications for oil producers like Nigeria.
The International Energy Association (IEA), the Paris-based think-tank that crafts energy policy for Western nations, is calling for immediate actions in advanced economies that can cut oil demand by 2.7 million barrels per day (bpd) in the next four months.
Some of the measures are practical and have worked in the past like reducing speed limits on highways, working from home up to three days a week and better investments in public transport infrastructure.
Some other measures are cost-effective like increasing car-sharing to reduce fuel use and cutting business flights in favour of more video conferencing. Some measures even benefit the environment like car-free Sundays in cities and the use of more electric vehicles.
10-point plan
The IEA says cutting current speed limits on highways by 10 km/h can significantly reduce fuel consumption for cars, light commercial vehicles and trucks.
Speed limits on highways vary widely among countries but are typically in the range of 100 km/h to 135 km/h across the Western world – except in Germany, which has no speed limit on some highways.
The IEA estimates that around 290,000 bpd of oil use can be saved in the short term through a speed limit reduction of just 10 km/h on motorways for cars. A further 140,000 bpd (predominantly diesel) can be saved if heavy trucks reduce their speed by 10 km/h.
Before the pandemic, the use of private vehicles to commute to work in advanced economies was responsible for around 2.7 million barrels of oil use a day, according to IEA estimates.
Yet, around one-third of the jobs in advanced economies can be done from home, opening up the possibility of reducing oil demand while maintaining productivity.
“One day of working from home can avoid around 170 kb/d of oil use. Three days of working from home avoids around 500 kb/d in the short term,” the IEA said.
Car-free Sundays were first introduced in countries like Switzerland, the Netherlands and West Germany during the 1973 oil crisis. More than 3,000 towns and cities registered for the European Mobility Week in 2021, which included a commitment to a car-free day.
Car-free Sundays help support the uptake of walking and cycling, which can generate a positive spill over effect throughout the week.
If this were implemented across Western countries, the IEA estimates that it will avoid around 380,000 bpd of oil use in the short term. If only one Sunday per month, the amount drops to 95,000 bpd, it said.
Shifting travel demand away from private cars to public transport, micro-mobility options, walking or cycling wherever practical are another recommended measure.
European countries are building cycle lanes along highways. For example, the French government allocated 500 million euros to an “active mobility fund” to build cycling itineraries.
It is estimated that short-term measures where feasible and culturally acceptable can avoid around 330,000 bpd of oil use.
Another counsel from the IEA is that countries should alternate private car access to roads in large cities. This entails restricting private cars’ use of roads in large cities to those with even number plates some weekdays and to those with odd-numbered plates on other weekdays, a measure that was once successfully implemented.
During the first oil shock, the Italian government substituted car-free Sundays with an odd/even number plate policy. Since the 1980s, such schemes have been deployed in many cities to tackle congestion and air pollution peaks, including Athens, Madrid, Paris, Milan and Mexico City.
The IEA estimates that this measure could cut around 210,000 bpd of oil in the short term if alternate car access is applied on two days per week in large cities with good public transport options.
The counsel for users from different households to carpool for non-urban trips will reduce oil demand and save money. Non-urban car trips are responsible for over 4 million barrels a day of oil use in advanced economies, says the IEA.
“An increase of around 50 percent in the average car occupancy across advanced economies in 1-in-10 trips and adopting best-practices to decrease car fuel use can save around 470,000 bpd of oil in the short term,” the IEA said.
The Paris-based think tank is also promoting efficient driving for freight trucks and delivery of goods. Efficiency measures include improved vehicle maintenance and driving eco-driving techniques as part of the tuition and examination processes required to receive a driving license.
It called for improving the efficiency of truck operations including optimising vehicle loads and reducing empty travelling. Cooperation between companies and widespread use of digital technologies can help achieve these goals, the IEA said.
The IEA says these measures can avoid around 320,000 bpd of oil use in the short term.
Western governments have been urged to replace short-distance flights with high-speed rails and night trains. In France, the recent Climate and Resilience law requires the cancellation of flights if alternatives exist to reach the destination within two-and-a-half hours.
The IEA says companies have already started to cut some flights, including between Paris and cities such as Nantes, Lyon and Bordeaux. It estimates that this measure will cut around 40,000 bpd oil use in the short term.
Where alternative options exist, Western governments have been urged to avoid business air travel. Several major corporations – such as HSBC, Zurich Insurance, Bain & Company and S&P Global – have already announced targets to cut their business travel emissions by as much as 70 percent.
This measure is estimated to avoid 260,000 bpd of oil use in the short term.
Read also: IEA members agree to release 120m barrels of oil from reserves
The Paris-based think tank is promoting the adoption of electric and more efficient vehicles. By the end of 2021, it said 8.4 million electric cars were on the roads in advanced economies, building on record sales in Europe in particular.
Demand for electric cars continues to be strong, on the back of plummeting costs of batteries in recent years and government support.
This is expected to trim more than 100,000 bpd of oil use in the short term, building on expected sales of electric and more fuel-efficient cars over the next four months. Sustained action on supply chains and policy support can help secure further savings, the IEA said.
Counsel from the IEA are not treated like mere suggestions, they form the fulcrum of Western countries energy policy. In the 1970s, the IEA advised western countries to begin stockpiles of crude oil.
This helped to prevent an energy crisis during the 1990s gulf war when oil prices rose sharply. Last week, they released 120m barrels into the global market to cool oil prices following Russia’s attack on Ukraine.
This development poses existential risks for oil producers who depend on fossil fuels to fund their budget. This explains why OPEC countries are working hard to diversify away from oil.
Nigeria currently sells the bulk of its oil to Western countries. A recent NBS data shows that half of the top buyers of Nigeria’s oil are IEA member nations.
Already Nigeria’s production is challenged by massive crude theft, sabotage and regulatory challenges, a loss of market share will pose a significant threat.
“Big risks lie ahead for the country, if it fails to fix its oil sector,” warns Ayodele Oni, energy lawyer and partner at Bloomfield law firm.
