Monday, September 25 2023 Sign In   |    Register

News Quick Search



Front Page
Power News
Today's News
Yesterday's News
Week of Sep 18
Week of Sep 11
Week of Sep 04
Week of Aug 28
Week of Aug 21
By Topic
By News Partner
Gas News
News Customization


Pro Plus(+)

Add on products to your professional subscription.
  • Energy Archive News

    Home > News > Power News > News Article

    Share by Email E-mail Printer Friendly Print

    Fatih Birol: "Right now there is more uncertainty about diesel than gas".

    January 26, 2023 - CE Noticias Financieras


      He has just landed from Paris and is in a hurry. Fatih Birol (Ankara, Turkey, 64 years old), director general of the International Energy Agency (IEA), takes 20 minutes to chat with EL PAÍS in the only interview he will give during his brief stay in Spain. In a few hours he will return to the French capital to take another plane to New York, where he will meet with the UN Secretary General, António Guterres.

      He gave several clear messages: that the coming winter may be even more difficult than this one and it is not advisable to relax; that Europe has to think about an industrial plan to compete with the US and China; that the supply of diesel cannot be taken for granted after the next veto on Russia, on February 5; and that a large part of what happens in the Old Continent depends on Beijing. A few minutes later he will meet with the top brass of the Spanish energy sector: Vice-President Teresa Ribera, with whom he is particularly well attuned, and the main electricity, oil and gas companies.

      Question. After many months of price tension in Europe, gas prices have dropped a lot. Will the current levels, still high but more manageable, be maintained?

      Answer: There are, above all, two factors that have allowed this drop: mild temperatures and China, whose demand for fossil fuels fell last year for the first time in four decades. It is the world's leading importer of oil and LNG [liquefied natural gas]. Kerosene consumption is always a good indicator, and what we have seen is that it is growing a lot and may soon be importing as before [from covid-19]. In the case of LNG, there is an added problem: the volume entering the markets this year will be one of the lowest in history. And if next winter is normal and not mild, we may see upward pressure on prices again.

      P. You have just been at the Davos forum, marked by optimism. Too much, perhaps?

      R. I have seen many European governments very happy about this change of tone [in the energy markets]. But I also took the opportunity to warn them not to relax.

      Q: You feel, then, that some executives are relaxing.

      R. Yes, and I have taken the opportunity to warn them not to pop the champagne too soon. Next winter may be even more difficult than this one. We still have to be very careful.

      P. LNG, especially from the United States, is set to be an essential factor in solving the crisis. But will it solve the problem on its own?

      R. It is helping and will continue to help, but it will not solve the situation by itself. We have to take many other measures, because the hole in the market is still very big.

      Q. More supply-side or demand-side measures?

      R. Both. We have to bring gas from more countries, but, above all, we have to accelerate with renewables and continue to reduce consumption.

      Q. Is there a risk of a repeat of last summer's highs in gas prices, or are they already part of history?

      R. It would be a surprise if they were repeated. Many circumstances coincided then: the low generation of the French nuclear power plant; the drought, which reduced hydroelectric production...

      P. The problem is that we are still well above the historical average of prices...

      R. I would also be surprised if we returned to those levels. Europe has to get used to living, for years, with higher prices than before. That is why it is more important than ever to have an industrial policy strategy. The European secondary sector is suffering from a double challenge: a current one, high energy prices; and a future one: the push from China in manufacturing technology for the production of clean energy and from the USA, especially after the Inflation Reduction Act. It is time for Europe to have a master plan for its industry that takes into account its competitive advantages.

      P. The oil market also calmed down in the final stretch of last year, but has rallied again in recent weeks.

      R. If Chinese demand rises strongly, it will again be an important factor [for prices to continue to rise]. And the second factor is the recent decision by OPEC and Russia to reduce pumping despite requests from the US or India. This is a completely different attitude from what they took in the past: when the economy was faltering and approaching recession, they did not cut oil production. If Chinese demand is not very strong and producers opt for a position that helps the markets, prices can continue at current levels.

      P. Practically everything depends on China.

      R. Absolutely. This is something that is sometimes overlooked in Europe: China is the largest importer of fossil fuels, and the world market depends to a large extent on what happens there.

      P. The Chinese reopening is bad news for Europe.

      R. Very bad news, because you will have more competition for energy. Our numbers say that China can eat 80% of the additional volume of liquefied gas that will enter the world market this year. Something similar is happening in the case of oil.

      Q. 2022 was the year of gas shortages. Will 2023 be the year of diesel shortages? There is little more than a week to go before the veto on imports of crude oil derivatives from Russia, which is your main supplier, comes into force...

      R. I fully understand that the European countries are taking this position with respect to Russia, but I must say that the embargo on oil products may be more challenging than the one on crude oil [already in force]. For diesel, for kerosene.... Europe will buy more from the Middle East, from India or from China.... Again, what China does with its idle refining capacity is going to be critical.

      Q. Is it diesel that you are most concerned about right now?

      R. It is a concern.

      Q. More than natural gas?

      R. There are more uncertainties about diesel.

      Q. Why?

      R. Because the diesel trade flows have been that way for decades, and now this changes them. I hope we don't see the price increases that we have seen in the case of gas. But again, it will be determined by China with its export policies.

      Q. Should European governments take measures to avoid a major bottleneck in diesel supply?

      R. For both very short-term energy security and environmental reasons, diesel consumption must fall. But that won't happen just by putting ads on TV: it would help, but more incentives are needed.

      P. However, there is no awareness campaign underway.

      R. I wouldn't be surprised to see them soon. Nor would IEA do anything along those lines in the next few weeks.

      P. Spain will soon assume the rotating presidency of the EU. What challenges will it have to face in the energy field?

      R. The first will be to prepare the bloc for next winter. The second will be to prepare that master plan to adapt European industry to the new environment. The Inflation Reduction Act in the U.S. is the biggest climate action since the Paris Agreement.

      P. You have already mentioned twice the need for such a master plan. Where should it go?

      R. I'll give you an example: Europe is the leader in the production of electrolyzers, it has a [competitive] advantage and must remain so. Another: today, China manufactures 80% of solar panels, but 20 years ago, when this industry started, the leaders were Spain, Italy and Germany.... They dropped the ball and the Asian country picked it up. In a marathon, the medal does not go to the person who arrives in the leading positions 10 kilometers from the end; it goes to the person who arrives first at the finish line. We have to learn from that.

      P. Europe is turning to green hydrogen, what would you say to those who say that this energy vector still belongs to the realm of science fiction?

      R. I think there are two misperceptions: those who think it is science fiction and those who think it will be a significant part of the energy matrix very soon. It will take some time for that to happen. I appreciate the political determination, but we still have to see exactly how much it will cost, where it will be produced and what its market is, who is going to buy it. I predict a very promising future for it.... But in the future.

      Q. When exactly?

      R. Around 2030.

      P. The BarMar, the new pipeline that will link Spain and France and continue on to Germany, is conceived as a hydro-product. If the plans come to fruition, it will not transport gas even in its initial phase.

      R. The first thing I must say is that investing in interconnections is always a good thing. However, the best thing would be for this pipe to work for a short period of time for natural gas and then for hydrogen. That would be the optimal solution. Gas consumption had started to decline in Europe before the Russian invasion of Ukraine, but it will still be needed, especially in some industrial areas.

      Q. 2022 will be remembered as the year of the definitive take-off of renewables in Europe. What bottlenecks remain to be solved to finish accelerating?

      R. Bureaucracy. If I had to choose three things I would say: faster processing of permits, faster processing of permits and faster processing of permits. There are more, of course, but that's the most important thing.

      Q. And for the electric car to take off?

      R. In 2019 only 3% of the vehicles sold were electric and in 2022 they were already 13%. And in 2023 we expect to see an even bigger jump. In 2030, which is practically tomorrow, all cars sold in Europe, in China and in the US will be electric. A few weeks ago I met with the 20 largest car manufacturers in the world, and for 18 of them the electric vehicle is already at the heart of their business model. Not for climatic reasons, but because it will be a source of money for them.

      P. However, some countries, such as Spain, are lagging somewhat behind on that front. Partly because of the still high cost of many models.

      R. Governments have to provide incentives, with subsidies and other policies, to encourage buyers to opt for electric cars. It is a good decision for that buyer, for the environment and for the country's economy as a whole.


    Other Articles - International


       Home  -  Feedback  -  Contact Us  -  Safe Sender  -  About Energy Central   
    Copyright © 1996-2023 by CyberTech, Inc. All rights reserved.
    Energy Central® and Energy Central Professional® are registered trademarks of CyberTech, Incorporated. Data and information is provided for informational purposes only, and is not intended for trading purposes. CyberTech does not warrant that the information or services of Energy Central will meet any specific requirements; nor will it be error free or uninterrupted; nor shall CyberTech be liable for any indirect, incidental or consequential damages (including lost data, information or profits) sustained or incurred in connection with the use of, operation of, or inability to use Energy Central. Other terms of use may apply. Membership information is confidential and subject to our privacy agreement.