The oil crisis triggered by the Iran war has permanently transformed the fossil fuel industry, steering countries away from fossil fuels to secure energy supplies, according to the world's leading energy economist.
Birol's Warning on Fossil Fuels
Fatih Birol, the executive director of the International Energy Agency (IEA), stated that the conflict between the US-Israel and Iran has eroded trust in fossil fuels, leading to reduced demand. 'The vase is broken, the damage is done – it will be very difficult to put the pieces back together,' he said. 'This will have permanent consequences for the global energy markets for years to come.'
Shift Towards Renewables and Nuclear
Birol emphasized that governments will revise their energy strategies, boosting renewables and nuclear power. 'There will be a significant boost to renewables and nuclear power and a further shift towards a more electrified future,' he explained. 'And this will cut into the main markets for oil.'
UK's North Sea Expansion Questioned
Addressing the UK's potential North Sea expansion, Birol urged caution. While the oil industry pushes for drilling in fields like Jackdaw and Rosebank, Birol argued that these would not significantly impact the UK's energy security or lower prices. 'They won't provide any significant quantities of oil and gas for many years to come,' he said. 'They will not lower the bills, the UK will remain a significant importer and price taker on international markets.'
Business Sense of New Exploration
Birol also questioned the commercial viability of new exploration licences. 'I am not even talking about the climate change effects – just from a business point of view, making a major investment in exploration might not make business sense,' he added. However, he supported tiebacks, which extend existing oilfields.
Opportunities and Risks in the Energy Transition
In a wide-ranging interview, Birol noted that the crisis presents expanded opportunities for renewable energy but also risks that could derail climate progress. He warned that high fossil-fuel prices might tempt developing countries to turn to coal, but solar remains competitive and growing faster. 'I don't see any downsides for renewable energy,' he stated, while also predicting increased nuclear power.
Windfall Taxes and Broader Impacts
While Birol previously called for windfall taxes during the Ukraine crisis, he said it is too early for new levies now. He highlighted that impacts on industries like fertiliser, food, helium, and software will persist even if the Strait of Hormuz reopens. 'This crisis is bigger than all the biggest crises combined,' he remarked.
Political Reactions
Birol's views on the North Sea were welcomed within the UK government. A Labour source said, 'We are delighted that the world's leading energy economist has reiterated his endorsement of a fair and managed transition in the North Sea.' Experts and campaigners echoed this sentiment. Ed Matthew of E3G stated, 'Birol is simply reflecting what every sane, independent energy analyst can see.' Tessa Khan of Uplift added, 'These facts don't change, they are just being drowned out by the noise from the oil lobby.'
More than 50 governments, including the UK, the EU, and major oil producers, will meet in Colombia for the first international conference on transitioning away from fossil fuels, where the global response to the oil crisis and renewable energy push will be discussed.
