The International Energy Agency forecast this month that global oil capacity could exceed demand by 2030, leading to a bearish trend for oil prices. OPEC has not specified a timeline for production increases, but has said its actions will depend on market conditions.
Oil prices, which are influenced by many factors other than supply and demand, rose to around $85 a barrel this week on hopes that the US Federal Reserve will cut interest rates to reverse losses in the wake of the OPEC deal to make.
“While it will not stop the growth of renewable energy, there is a risk that Opec’s move could block further investment and dependence on oil and gas in some regions,” Tong said, adding that there is little room for the expansion of oil. gas and coal fields if the world wants to limit global warming.
In line with Cop28 targets, governments, including the 12 OPEC countries, must take action to phase out fossil fuels from now on
An August report from Oil Change International warned that extracting current oil and gas reserves would emit 25 percent more carbon than the target of 1.5 degrees Celsius (2.7 degrees Fahrenheit). Existing fields and mines already contain enough fossil fuels to exceed 2 degrees of warming, making parts of the planet uninhabitable, the report said.
“In line with the goals of Cop28, governments, including the 12 OPEC countries, must take action to phase out fossil fuels from now on,” Tong said.
Although Russia is not a member of OPEC, the country has in the past coordinated its oil production in line with the group to ensure price stability.
Analysts expect oil demand to gradually decline as falling renewable energy costs undermine profit margins on fossil fuels, despite fears of increased production.
Renewable energy capacity is expected to increase in the coming years in the oil-rich Middle East, where green energy is expected to surpass fossil fuels in domestic energy consumption by 2040, according to a Rystad Energy report published late last month.
Lack of action on green energy
It would be shortsighted to blame OPEC alone for climate change, says Dhruba Purkayastha of the Council for Energy Environment and Water think tank in New Delhi, because the focus is on managing supply and demand in domestic markets.
“At first glance, OPEC’s decision appears to contradict climate goals,” he said, noting that the cartel’s members were spread across different regions. “But the real problem is that global renewable energy capacity has not grown sufficiently despite Cop pledges.”
More than 100 countries pledged at Cop28 to triple renewable capacity by 2030, but little action followed, Purkayastha said.
At their recent June 13-15 meeting, G7 leaders reiterated the Cop28 pledge to transition away from fossil fuels but failed to clarify key climate targets, Purkayastha said.
Luca Bergamaschi, co-founder of ECCO, an Italian climate change think tank, said the meeting “lacked plans and timelines to phase out investment and production in oil and gas.”
Analysts say the urgency of climate action is underlined by unprecedented heat waves in Asia, one of the regions most vulnerable to climate change.
“We must act as a global brotherhood because we have little time to bend the emissions curve. That means we need a new paradigm of multilateral action,” Purkayastha said.