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LONDON: Greta Thunberg’s bitter sacking of world leaders for their promises to fight global warming as ‘blah, blah, blah’ was not what it turned out, too far off target in 2021.
Despite serious commitments from Washington to Beijing to reduce fossil fuel consumption and reduce global heating emissions, demand for crude oil has skyrocketed in 2021 as the global recovery from the COVID-19 pandemic was taking off.
Don’t tell Greta, but oil prices have risen about 50% this year, thanks to increased demand and tight supply.
In January, the month Joe Biden was sworn in as President of the United States and Washington joined the Paris Agreement on climate emissions, a barrel of Brent crude was trading at around $ 52.
By March, it had climbed to $ 70.
The momentum in oil prices had picked up since the last quarter of the previous year, but the immediate catalyst for the March peak, and indeed the increase in world crude prices this year, began with OPEC. and its allies, who surprised the markets by agreeing to extend their production drops in April.
Amid an emerging economic recovery, low inventories and a lack of spare capacity, oil supplies suddenly seemed much tighter.
The surge in demand for oil as COVID-19 restrictions began to ease in mid-year took suppliers by surprise and led to tensions between the United States and OPEC + .
As demand exceeded supply, domestic gas prices soared in the United States.
In reality, like all world oil producers, OPEC + has struggled to increase production due to underinvestment. While oil investments have grown by around 10% this year, spending has remained well below pre-pandemic levels as pressure continues on private companies to control oil and gas portfolios. .
In June, more than 400 leading investors controlling $ 41 trillion in assets called on governments around the world to end their support for fossil fuels. No wonder a report by the International Energy Agency released this year notes that “the balance of investments in fossil fuels is shifting towards state-owned enterprises.”
Even the American shale industry, which a few years ago was considered the world’s largest producer of oil, has restrained its spending. As Saudi Energy Minister Prince Abdulaziz bin Salman put it succinctly in March: “Drill, baby, drill”, the mantra of the US fracking industry, “is gone forever”.
The International Energy Agency did little to help investments when in May it demanded an immediate end to fossil fuel mining, a request that Prince Abdulaziz bin Salman again succinctly described as a scenario. la-la-terre ”.
In an environment hostile to fossil fuels, investments in renewable energies continued to grow this year. Indeed, in 2021, renewable energies were the only energy sector to see investments exceed pre-pandemic levels, up by around 10% since 2019.
But of course, the problem with calls for divestment in the oil industry is that tackling supply does absolutely nothing to dampen consumer demand – the real driver of global warming. So, as the world turned to the delayed Tokyo Olympics, which began in July, black gold was sprinting towards $ 75.
In October, just weeks before world leaders gathered to proclaim their commitment to tackling climate change at the COP26 United Nations Climate Conference in Glasgow, Brent crude peaked in around seven years. $ 86 per barrel.
The October price increase was largely due to forecasts of a supply shortfall as demand continued to rise. At the same time, the sharp rise in world prices for gas, and even coal, since August has forced many power producers to turn away from natural gas to fuel oil and diesel.
European wholesale gas prices have increased by more than 800% compared to 2021 due to a combination of global demand and competition between Europe and Asia for supply.
EU leaders have also accused Russian President Vladimir Putin, whose country supplies around a third of Europe’s gas, of cutting off supplies to force the EU to approve its controversial Nord Stream 2 pipeline. The pipeline is slated to supply oil. to Europe, but bypasses Ukraine, which has long-standing territorial disputes with Russia.
October’s peak oil was once again aided by OPEC +, which insisted earlier in the month on sticking to its July pact to gradually increase supply, ignoring President Biden’s fresh calls to open the taps as gasoline prices in the United States hit a seven-year high.
In response, and just days after calling for urgent action on climate change at COP26 in November, Biden announced the largest release of emergency oil reserves in U.S. history from the stockpile. strategic oil of the country. The release of 50 million barrels of oil had no impact on prices, which jumped 2% at the news.
At the very least, Biden’s action in November revealed that 2021 marked the year OPEC and its allies found themselves in charge of setting the global price of crude oil.
Despite a pullback towards the end of the year, the drop was largely due to fears that government travel restrictions due to the omicron variant would hit the aviation industry, Brent crude is trading still at nearly $ 80 a barrel in December and 2021, is drawing to a close.
Looking forward to 2022, a report from JP Morgan in December predicted that oil would hit $ 125 a barrel next year and, buckle up, $ 150 in 2023, again due to production shortfalls in the country. OPEC +.
“We believe OPEC + will slow increases initiated in early 2022, and believe the group is unlikely to increase supply unless oil prices are well supported,” the bank said.
A slightly more conservative estimate from Goldman Sachs also predicts a high level of oil next year and in 2023, with crude reaching between $ 100 and $ 110 a barrel.
The IEA now predicts that crude consumption will reach 99.53 million barrels per day in 2022, up from 96.2 million this year, and will more or less return to pre-pandemic levels.
As a result, carbon emissions are set to increase 16% by 2030 according to the UN, rather than halving, the reduction needed to keep global warming below the Accord’s limit. Paris of 1.5 ° C.
Happy New Year Greta – and to all Arab News readers.