The View | As US and Europe push climate policies, Middle East and Russian state oil producers stand to benefit

In the long term, US and EU green policies to reduce fossil fuel investments will increase the market share of Middle Eastern and Russian oil and gas producers

Global demand for fossil fuels shows no sign of slowing as developing countries aim to grow rapidly to meet the aspirations of their citizens

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The sun sets behind an idle pump jack near Karnes City, Texas, on April 8, 2020. In the US, the Biden administration has adopted an “all-of-government” approach to hobble domestic oil and gas production and fight climate change. Photo: AP

Published: 1:30am, 1 Jul 2021Updated: 2:14am, 1 Jul 2021

In mid-May, the International Energy Agency – the rich world’s pre-eminent adviser on energy affairs – issued a bombshell report calling for an immediate end to all new investments in the global oil and gas sector, so the world could reach net zero carbon emissions by 2050.

A few days later, the Group of 7 confirmed its support for the net zero goal, “by 2050 at the latest”. Yet, less than a month later, the IEA bafflingly called on OPEC+ countries to increase oil output to avoid an upward price shock as Brent crude prices – the international benchmark – hit three-year highs.

The resumption of economic growth around the world, as countries ease pandemic-related restrictions on business and travel, is driving global energy demand.

Global oil demand is now back at about 95 per cent of the pre-Covid-19 high of just over 100 million barrels a day in 2019, and is expected to be higher in 2022. Oil has been trading at over US$70 a barrel in recent weeks.

Falling inventories and the improved demand outlook have led market observers to suggest that oil priced at US$100 per barrel by the end of the year is entirely possible.

The Middle East’s oil exporters stand to gain from higher prices over the next two years, especially since in the US, the Biden administration has adopted an “all-of-government” approach to hobble domestic oil and gas production and fight climate change.