The International Energy Agency predicted this month that global oil capacity could exceed demand in 2030, which could lead to a bearish trend in oil prices. Opec did not specify a timetable for the production increase, but said its steps will depend on market conditions.
Oil prices, which are affected by many factors besides supply and demand, rose slightly to around $85 a barrel this week on hopes that the U.S. Federal Reserve will cut interest rates to reverse losses from the OPEC deal.
“Although it will not stop the growth of renewable energy, there is a risk that OPEC’s move may block further investment and dependence on oil and gas in some regions,” Tong said, adding that there is little room for oil expansion. gas and coal fields if the world is trying to limit global warming.
In line with the goals of Cop28, governments, including the twelve OPEC countries, must act to phase out fossil fuels.
An August report by Oil Change International warned that extracting current oil and gas reserves would emit 25 percent more carbon than the 1.5 degrees Celsius (2.7 degrees Fahrenheit) warming target. Existing fields and mines already contain enough fossil fuels to overcome 2 degrees of warming, making parts of the planet uninhabitable.
“In line with the Cop28 goals, governments, including the twelve OPEC nations, must act to phase out fossil fuels starting now,” Tong said.
Although not a member of OPEC, Russia has in the past coordinated its oil production in line with the group to ensure price stability.
Analysts expect oil demand to gradually ease as falling renewable costs erode profit margins from fossil fuels, despite concerns about increased production.
Renewable capacity is set to increase in the coming years in the oil-rich Middle East, where green energy is expected to overtake fossil fuels in domestic energy use by 2040, according to a Rystad Energy report released late last month.
Green energy action is missing
Blaming OPEC alone for climate change would be short-sighted, said Dhruba Purkayastha of the Energy Environment and Water Council think tank in New Delhi, as it focuses on managing supply and demand in its own markets.
“On the face of it, OPEC’s decision appears to be in conflict with the climate goals,” he said, adding that the cartel’s members were spread across different regions. “But the real problem is that global renewable capacity has not seen adequate growth despite Cop promises.”
More than 100 countries pledged at Cop28 to triple renewable capacity by 2030, but little action followed, Purkayastha said.
At their recent June 13-15 meeting, G7 leaders reiterated the Cop28 commitment to transition away from fossil fuels, but failed to clarify key climate targets, Purkayastha said.
Luca Bergamaschi, co-founder of ECCO, an Italian think tank on climate change, said the meeting lacked “plans and timetables for phasing out oil and gas investment and production”.
Analysts say the urgency of climate action has been highlighted by unprecedented heat waves in Asia, one of the regions most vulnerable to climate change.
“We must act as a global brotherhood because we have limited time to bend the emissions curve. This means we need a new paradigm of multilateral action,” said Purkayastha.