A global energy crunch is expected to boost oil demand by half a million barrels per day (bpd) and could stoke inflation and slow the world’s recovery from the COVID-19 pandemic, the International Energy Agency (IEA) said on Thursday.
Oil and natural gas prices have soared to multi-year highs recently, sending power prices surging to record levels as widespread energy shortages engulf Asia and Europe.
“Record coal and gas prices, as well as rolling blackouts, are prompting the power sector and energy-intensive industries to turn to oil to keep the lights on and operations humming,” the IEA said in its monthly oil report.
“Higher energy prices are also adding to inflationary pressures that, along with power outages, could lead to lower industrial activity and a slowdown in the economic recovery.”
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As a result, global oil demand next year is now projected to recover to pre-pandemic levels, the Paris-based agency added. It made upward revisions to its demand forecasts for this year and 2022, increasing them by 170,000 bpd and 210,000 bpd respectively.
“A surge in spending on clean energy transitions provides the way forward, but this needs to happen quickly or global energy markets will face a bumpy road ahead,” the report said
Releasing its flagship annual energy outlook ahead of a key climate conference in Britain next month, the IEA on Wednesday said that the economic recovery from the pandemic was “unsustainable” and revolved too much on fossil fuels.
Investment in renewable energy needs to triple by the end of the decade if the world hopes to effectively fight climate change, it said on Wednesday.