IEA: Stricter price cap enforcement won’t impact oil supply.

IEA Executive Director Says G7’s Price Caps on Russian Energy Won’t Affect Global Supply

The International Energy Agency (IEA) does not expect the Group of Seven (G7) nations’ efforts to counter the evasion of price caps on Russian energy to change the supply situation for crude oil and oil products, according to the IEA’s Executive Director Fatih Birol. The G7, the European Union, and Australia agreed to impose a $60-per-barrel price cap on Russian seaborne crude oil and set an upper price limit for Russian oil products to deprive Moscow of revenues for its invasion of Ukraine. The G7 will enhance efforts to counter evasion of the caps “while avoiding spillover effects and maintaining global energy supply,” the group said on Saturday, without giving details, during its annual leaders’ meeting.

Gas Investments and Climate Activists’ Concerns

The G7 has also brought support for gas investment back to the communique on Saturday, which it said was a “temporary” solution to address potential market shortfalls and as nations are trying to de-couple from Russian energy. The move has alarmed climate activists who warned the group may fail to deliver on its goal to achieve net-zero carbon emissions by 2050 and limit global warming to 1.5 degrees Celsius (2.7 Fahrenheit). However, Birol said that “countries once again reiterated that if there are some impacts to slow down in that area, they are going to accelerate in the other areas that it will not change their determination of reaching the 1.5 degree Celsius goal.”

• The language change was brought in by Germany, once a top buyer of Russian gas, sources have said, and the communique did not have a time frame for investments into the gas sector.
• “There is no determination of any time frame there, but I think the main issue is because of the reliance of especially European countries on Russian gas almost for decades. Now it is not easy to change everything from one day to another,” Birol said.
• “(German) Chancellor (Olaf) Scholz made clear again and again that Germany is very keen to reach this 1.5 degrees target. And I believe in his words.”

Despite concerns, Birol believes that the clean energy transition is happening much faster than many think.

(Reporting by Katya Golubkova and Sakura Murakami; Editing by Christian Schmollinger)