Energy crisis is unprecedented, and prices are likely to rise further, says global agency head

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The world is plunging into an unprecedented energy crisis, not just oil, and prices are likely to continue rising, warned the executive director of the National Energy Agency, Fatih Birol. Even so, he considers that any fuel control or subsidy policies should focus on helping the poorest strata only.

“Many countries have talked about holding fuel prices in Europe, Asia, everywhere. For me, measures like this, to protect the population, should not be universal, but focused on the poorest,” said Birol when asked by journalists. in Davos regarding the debate involving price controls in Brazil, which culminated in successive changes in command of Petrobras.

“I think markets work best without intervention. There may be a reason, from time to time, for governments to provide some strategic guidance to markets, but governments need to decide when to intervene and when not to be heavy handed.”

Birol, head of the main multilateral entity on the subject, participates in the annual meeting of the World Economic Forum in Davos (Switzerland) and spoke with the Sheet and two other Brazilian vehicles about the current crises.

He declined to comment directly on the change in direction at Petrobras, limiting himself to saying that the company “has been very successful historically, and has managed to transform Brazil from an oil importer to an exporter of oil, even though it faces volatility.”

For the Turkish economist, in charge since 2015, the world is in the midst of its first global energy crisis.

“In the past, we had oil crises, in the 1970s, but it was just oil. Now we have an oil crisis, natural gas and coal. It’s a bigger crisis”, he pointed out, citing the Ukrainian War.

“Russia, just a few weeks ago, was the world’s biggest oil exporter and the biggest natural gas exporter, as well as being a major player in the coal market. With Russian supplies falling, there is a big price increase.”

In this scenario, product prices should continue to rise and put pressure on inflation. “Except for any surprises such as a Middle Eastern country raising production, we should still have high prices and market volatility for some time,” he said, pointing out that in the northern summer (from the end of June) demand should increase with the period of vacation and travel in the Northern Hemisphere.

“My concern is that with the rise in the price of oil, gas and food, we will see inflation rise, and some economies could go into recession.”

Birol sees three possibilities that the darkest scenario will not materialize: 1) if there is a significant increase in production from key Middle Eastern countries to comfort the market; 2) if the Chinese economy remains weak and Chinese demand for oil remains stable; 3) with interest rate calibration by central banks.

The recession could bring an additional problem to the transition from fossil fuels to so-called clean energy, with a return to coal.

“Some countries, especially in Asia, which, affected by challenges in energy security, can make large investments in coal. If they do that, we will be compromising our future and our chance of reaching the direction in climate will be in check”, he pointed out. “It’s a big risk.”

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