Global energy system's foundations shifting, but problems exist - IEA

18 February 2013 14:37  [Source: ICIS news]

LONDON (ICIS)--The foundations of the global energy system are changing, said Fatih Birol, chief economist and director of Global Energy Economics at the International Energy Agency (IEA), speaking at the IP Week conference in London on Monday.

Birol added various difficulties exist that ought to be addressed. There are three main drivers of these significant changes, he said.

First, there is a resurgence of oil and gas production in some countries that might not have been expected. The US and Iraq are just two.

Second, following the Japanese earthquake and nuclear disaster at Fukushima in 2011, many countries, such as Germany and Italy, are retreating from the use of nuclear power.

Third, policies are increasingly focused on energy efficiency. Europe, the US, Japan and even China are now considering this more carefully. However, this is not necessarily driven solely by environmental concerns, but by cost, Birol said.

A number of issues exist, however, pointing to an unsustainable energy system.

Record high oil prices are acting as a brake on the global economy, according to Birol. Furthermore, oil price hikes are likely to continue this year, he said.

Second, fossil fuel subsidies exist in many emerging economies. In 2011, subsidies increased substantially to $500bn (€375bn). In some Middle East and North African (MENA) countries, subsidies ensure oil for domestic use is extremely cheap, thereby providing an incentive to release more carbon into the atmosphere at a time when other regions, such as Europe, are trying to discourage the use of fossil fuels by means of taxation.

Furthermore, the growth of MENA domestic oil consumption is likely to exceed oil production is those countries. This could lead to a reduction of exported material, which could impact the rest of the world.

Third, Birol pointed out, carbon dioxide emissions are at record highs, while development of renewable energy is under strain. 2012 saw a decline in global renewable energy investments, Birol said.

Birol concluded that policymakers face critical choices in reconciling energy, environmental and economic objectives.

The changing outlook in energy production and use - with the US heading towards self-sufficiency, while Europe, China, India and Japan are likely to require increased imports of fuel – may redefine global economic and geopolitical behaviours, he said.

($1 = €0.75)


By: Jo Pitches
+44 208 652 3214



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