Stricter enforcement of price caps will not affect oil supplies Ship’s crew

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HIROSHIMA, Japan, May 21 (Reuters) – The International Energy Agency (IEA) does not expect moves by the Group of Seven to counter bypassing Russian energy price caps will change the supply situation for crude oil and oil products, it said Fatih Birol, Executive Director of the IEA.

The G7, the European Union and Australia agreed to impose a $60-per-barrel price cap on Russian sea crude and also set a price cap on Russian oil products to deprive Moscow of revenue for its invasion of Ukraine.

The G7 will step up efforts to counter cap circumvention “while avoiding spillovers and maintaining global energy supplies,” the group said Saturday during its annual meeting of leaders, without giving details.

The IEA, which provides analysis and input on energy to the G7, sees no impact on global oil and fuel supplies from increased enforcement of price caps, Birol told Reuters in an interview on the sidelines of the summit.

“As always, we will consider any significant changes in the markets in our analysis and in our reports, but at the moment I see no reason to change our analysis,” he said.

According to Birol, the price cap achieved two main goals: it did not cause tension in the markets, as Russian oil continued to flow, but at the same time it reduced Moscow’s revenues.

“Russia played the energy card and it failed. But there are some loopholes and some challenges for the oil price cap to work better,” Birol said.

GAS INVESTMENTS

The G7 also expressed support for the gas investments in their communiqué on Saturday, saying it was a “temporary” fix to address potential market shortfalls and as nations seek to decouple from Russian energy.

The move has alarmed climate activists, who have warned that the group may fall short of its goal of achieving net-zero carbon emissions by 2050 and limiting global warming to 1.5 degrees Celsius (2.7 Fahrenheit). .

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“There might be some impact, but countries have reiterated that if there is some impact to slow down in this area, they will accelerate in the other areas, so this will not change their determination to see 1.5 -Celsius target to be reached”, as Birol calls it.

“The transition to clean energy is happening, and much faster than many think.”

The language change was brought about by Germany, which was once a major buyer of Russian gas, sources said, and the communiqué did not include a timeframe for investments in the gas sector.

“There is no specific timeframe, but I think the main problem is that European countries in particular have been dependent on Russian gas for almost decades. Now it’s not easy to change everything from one day to the next,” said Birol.

“(Chancellor) Scholz has repeatedly made it clear that Germany is very interested in achieving this 1.5-degree target. And I believe in his words.”

(Reporting by Katya Golubkova and Sakura Murakami; Editing by Christian Schmollinger)

(c) Copyright Thomson Reuters 2023.

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