Soaring oil prices are a “transition premium” for renewable energy: OPEC Chairman

Dubai, United Arab Emirates — OPEC Secretary-General Mohammed Barkindo told CNBC on Tuesday that the spike in oil prices is the cost of trying to switch to renewable energy.

Barkindo told CNBC’s Dan Murphy at the Gastech conference in Dubai: “I talked about a new premium that is emerging in the energy market. I call it a transition premium.”

The long-term head of the oil cartel criticized him for taking over-emotional approaches to energy policy and climate change, but he did not specify who should be responsible for the “distortion of facts” he said.

Barkindo argued that “there is distortion of facts and science, and the distortion of these facts in the conversation is unhealthy, because climate change and energy transition should be guided by science.”

“The Intergovernmental Panel on Climate Change should be the most authoritative institution on climate change and transformation,” he said. “We at OPEC believe that they are doing a good job. They are producing very, very important groundbreaking reports, but unfortunately, these reports have been put aside, and the current discussions are more or less driven by emotions, not greatness. The work done by this scientific institution for all of us.”

Chairman OPEC’s words reflect the growing debate among policymakers and energy executives about the future of energy, renewable energy and the climate. Many governments around the world, especially those in Western countries, are pushing to get rid of the use of fossil fuels, while industry insiders believe that rapid transformation attempts will disrupt the market and harm consumers, and ultimately are unrealistic.

This year alone, global natural gas prices have tripled, causing ripples in the market and raising concerns that commodity prices will only continue to rise.

The root cause of the price increase is Higher demand and lower supply, Because the higher summer temperatures in the United States stimulate demand for air conditioners, and The cold in other parts of the UK is longer Spring means increased demand for heating.

All of this leads to a reduction in natural gas supply in the coming winter months, which means that we may see tight supply and price increases.

Since the beginning of the coronavirus pandemic, the price of natural gas has been very low, about US$2 per million British thermal units or mmBtus. However, with the expansion of vaccination activities, the reopening of the economy and the resumption of travel have promoted the increase in demand.

United Arab Emirates Energy Minister Suhail Al Mazrouei spoke to CNBC at the same event, saying that although natural gas prices seem to be high, they were at very low levels from the start.

“It comes from a very low environment,” Al Mazrouei said of the natural gas price situation. “I think the current prices, if they continue, will burden many countries. In the long run, the demand side will not be ready to accept such prices.”

The Minister of Energy stated that “the right balance is the balance between the affordability of consumers and the reasonable returns we see for developers and producing countries,” but added, “we have not done this yet.”

Al Mazrouei pointed out that the costs, regulations and financing needs surrounding new energy projects are any obstacles to returning to low prices.

“This is a situation that reacts to the low-gas environment that occurred before,” he continued. “Now, what is sustainable, I think the market will determine it. There are challenges in financing new projects, especially for international oil companies (international oil companies). We need to have a realistic view on relaxing such restrictions so that they Financing new projects. Projects.”

“This is what I think we will discuss between the industry, companies and consumers, and some developers. I hope that during the discussion of the event, they can announce new projects that can balance prices in the future,” he added.