The oil crisis triggered by the Iran war has changed the fossil fuel industry for ever, turning countries away from fossil fuels to secure energy supplies, the world’s leading energy economist said.
Fatih Birol, the executive director of the International Energy Agency (IEA), also said that, despite pressure, the UK should forgo much of its potential North Sea expansion.
Speaking exclusively to the Guardian, Birol said a key effect of the US-Israel war on Iran was that countries would lose trust in fossil fuels and demand for them would reduce.
“Their perception of risk and reliability will change. Governments will review their energy strategies. There will be a significant boost to renewables and nuclear power and a further shift towards a more electrified future,” he said. “And this will cut into the main markets for oil.”
Birol said there was no going back from the crisis: “The vase is broken, the damage is done – it will be very difficult to put the pieces back together. This will have permanent consequences for the global energy markets for years to come.”
While focused on the global picture of shortages and future demand, the IEA chief also urged caution over the UK’s potential plans. The oil industry and its allies have called for increased North Sea drilling, including giving the go-ahead to the Jackdaw and Rosebank fields that have received exploration licences but not production permits.
Birol said: “It is up to the government, but these fields would not change much for the UK’s energy security, nor would they change the price of oil and gas. They would not make any significant difference to this crisis.”
He also cautioned against granting exploration licences for further new fields on commercial grounds.
“They won’t provide any significant quantities of oil and gas for many years to come,” Birol said. “They will not lower the bills, the UK will remain a significant importer and price taker on international markets. 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.”
Tiebacks, whereby the range of existing oilfields are extended, were a different matter, he added – they should go ahead.
In a wide-ranging interview, Birol said the vastly changed future outlook presented expanded opportunities for renewable energy but also dangers that could throw progress on the climate off track. As the longtime head of the global energy watchdog, he is one of the most influential voices on governments globally.
Birol also said:
Continuing high fossil-fuel prices could tempt developing countries to turn to coal, but solar was competitive with coal on cost and was growing faster.
Renewables offerred a no-regrets alternative and nuclear power was also likely to be increased. ‘The damage is done’: global oil crisis has changed fossil fuel industry
