Crisis in Middle East Adds Stress to Oil Markets
Tensions from the war in Gaza may accelerate the shift from planet-warming fossil fuels like oil and gas and toward renewable energy, electric cars and heat pumps — similar to how sharp increases in the price of oil during the 1970s unleashed efforts to conserve fuel, the head of the International Energy Agency said.
“Today we are again facing a crisis in the Middle East that could once again shock oil markets,” said IEA Executive Director Fatih Birol. That comes on top of the stress on energy markets from Russia’s cutoff of natural gas to Europe over its invasion of Ukraine, he said.
The attack on Israel by the militant organization Hamas and the ensuing Israel military operations has raised fears of a wider Mideast conflict.
Up to this point, the increase in oil prices has remained relatively moderate. On Tuesday, the international benchmark Brent crude traded at US$90.17 per barrel, a rise from approximately $84 just before the Hamas attack. So far, the conflict has not resulted in any disruptions in the supply of oil.
Although fossil fuel prices have decreased from their 2022 peaks, the International Energy Agency (IEA) noted that “markets are tense and volatile” in their report.
Fatih Birol, the Executive Director of the IEA, emphasized that a significant government response was seen during a similar energy supply crisis 50 years ago, triggered by the Arab oil embargo during the 1973 Yom Kippur war. This crisis led to nearly a 300% increase in oil prices and the establishment of the IEA in 1974 to coordinate a collective response to such disruptions. The 1978 Iranian revolution further exacerbated price shocks. At that time, solutions included the expansion of nuclear power plants and the imposition of fuel-efficiency standards for automobiles.
Birol highlighted the availability of various technologies this time, including solar, wind, nuclear power, and electric cars. He anticipates their significant adoption worldwide, which will further advance the energy transition. He pointed out the rapid proliferation of electric cars, with the ratio increasing from just one in 25 cars in 2020 to one in five in 2023. Additionally, the share of fossil fuels in electricity generation has decreased from 70% a decade ago to 60% today and is projected to reach 40% by 2030.
The IEA stressed the need for coordinated international action at the upcoming United Nations climate conference to promote the use of clean technologies and explore new financing approaches, particularly in developing nations.
The report also emphasized a changing role for China, which was once a primary source of rising energy demand due to rapid industrialization and growth. The report anticipates that energy demand in China could peak as early as 2025 due to decelerating growth and remarkable transitions to clean energy sources such as solar and nuclear.
The IEA estimates that under current policies, demand for fossil fuels will peak before 2030. However, they assert that governments must intensify their efforts to expedite the transition if the world is to achieve the global goal of limiting global warming to below 1.5 degrees Celsius.
Google Play and the Google Play logo are trademarks of Google LLC.
