IEA report shows countries switching from natural gas to oil
Rising natural gas prices are prompting many countries to switch to oil for energy, which could impact the transition.
Skyrocketing prices of natural gas following the Russian invasion of Ukraine have prompted a mass switch to oil, according to the International Energy Agency (IEA), raising concerns it could impact the energy transition.
The latest data from the IEA found that increased use of oil in power generation and more generally has boosted demand for the fossil fuel, especially in Europe, the Middle East, and across Asia.
The IEA also confirmed that fuel switching is taking place in European industries such as refining.
As such, it has been forced to raise its estimates for global demand growth for 2022 by 380 thousand barrels per day (kb/d) to 2.1 million barrels per day (mb/d).
While both oil and gas are carbon-emitting energy sources, oil is considered the more severe emitter of the two, with natural gas classed as a transition fuel in the recently ratified EU Taxonomy for Sustainable Activities.
In a previous report, IEA executive director Fatih Birol noted the importance of natural gas as a transition energy source.
He said: “Natural gas is one of the mainstays of global energy. Where it replaces more polluting fuels, it improves air quality and limits emissions of carbon dioxide.”
[OPEC+] implicitly said that if the world wants more oil it needs to make the oil itself because there is not much more oil to be expected from OPEC+ in the near term, except for the possibilities from Iran and Venezuela.
High demand, low supply
Nations under the Organisation of Petroleum Exporting Countries (OPEC) will also be making minimal increases to output as the price of oil stabilises following increased demand in 2022, according to Nordic bank SEB.
OPEC+ (which includes 10 major non-OPEC oil-exporting nations) decided at its latest meeting to lift its production cap by 100,000 barrels a day from September with both Russia and Saudi Arabia getting a cap of 11 million barrels a day.
A higher cap is however no obligation to lift production to that level, and according to analysis by SEB, production is unlikely to increase by this amount next month.
Following the OPEC+ meeting, the oil cartel blamed limited increases in production on “chronic underinvestment in upstream oil and gas over several years”.
Bjarne Schieldrop, chief analyst for commodities at SEB, said: “The group implicitly said that if the world wants more oil it needs to make the oil itself because there is not much more oil to be expected from OPEC+ in the near term, except for the possibilities from Iran and Venezuela.
“[US president] Joe Biden recently went to the Middle East asking for more oil; he got next to nothing.”
