The Executive Director of the International Energy Agency, Fatih Birol, has warned that emerging and developing countries are the most vulnerable to soaring energy prices.
“It is not the United States that will suffer the most [from] high energy prices,” Birol told CNBC on Tuesday.
Birol said those who will be hardest hit are oil-importing countries in Africa, Asia and Latin America due to rising import prices and weak currencies.
In May, the International Monetary Fund revised down its growth forecast for oil-importing nations, as rising energy prices were expected to add to a litany of economic challenges already plaguing those countries.
“Rising commodity prices come on top of challenges stemming from high inflation and debt, tighter global financial conditions, uneven immunization progress, and underlying fragilities and conflicts in some countries,” the IMF said in its report.
An oil terminal next to the multipurpose port of Doraleh in Djibouti. In May, the International Monetary Fund downgraded growth forecasts for oil-importing countries, with the idea that rising energy prices would add to the litany of economic challenges already plaguing those countries. .
Yasuyoshi Chiba | AFP | Getty Images
Oil-importing countries in the Middle East and North Africa include Djibouti, Sudan, Morocco, and Pakistan, among others.
Europe is grappling with a gas shortage as Russia cuts supplies, forcing many countries into an energy crisis as winter approaches. The UK’s National Grid has warned of possible power outages.
“First truly global energy crisis”
“We are in the midst of the world’s first real energy crisis,” Birol said. “Our world has never witnessed an energy crisis of such depth and complexity.”
He added that oil markets will continue to experience volatility as long as Russia’s war in Ukraine persists.
OPEC+ agreed to impose deep production cuts earlier this month, seeking to spur a recovery in crude prices despite pleas from the United States to pump more to help the global economy.
Birol called the decision “unprecedented” and likened the energy alliance’s decision to “scoring an own goal”.
The result of inflated prices would be an economy “flirting with a recession”, which he warned will lead to an environment that is neither good for buyers nor sellers.
Birol also said he expected the world “to continue to see high LNG prices”, citing the rebound in China’s economy and Europe’s need to import more energy.
According to Birol, LNG prices in the Asia region are five times higher than those of the past five years on average, and next year will see more challenges.
“Europe wants to buy LNG, China is coming back as a major LNG importer, and there is very little new LNG capacity coming. [the] market,” he attributed as reasons.
Soaring energy prices plaguing global markets could provide the much-needed impetus for governments to invest in phasing out dirty energy.
An aerial of the Strategic Petroleum Reserve storage at the Bryan Mound site seen October 19, 2022 in Freeport, Texas. The main victims who will bear the brunt of high energy prices are neither the United States nor Europe, but emerging and developing countries, says the head of the International Energy Agency (IEA) , Fatih Birol.
Brandon Bell | Getty Images News | Getty Images
“We must not forget that this crisis is pushing many governments around the world to invest huge sums of money [into] clean energy transitions,” said Birol.
He cited the recently enacted Inflation Reduction Act. The White House says climate investment will reduce costs from rising temperatures, minimize property damage from rising sea levels and other disasters, and reduce health impacts such as premature deaths .