Will a price cap on Russian oil have much impact? What you need to know about the global energy crisis this week

(Credit: Unsplash)

This article is brought to you thanks to the collaboration of The European Sting with the World Economic Forum.

Author: Stefan Ellerbeck, Senior Writer, Formative Content


  • This weekly round-up brings you the latest on developments in the global energy sector.
  • Top energy stories: Will a price cap on Russian oil have much impact? Lithium prices fall in China as electric vehicle subsidies set to end; Viet Nam ramps up coal production while scaling back renewable targets.
  • For more on the World Economic Forum’s work in the energy space, visit the Shaping the Future of Energy, Materials and Infrastructure Platform.

1. News in brief: Energy stories from around the world

The G7 nations’ proposed price cap of $65-70 a barrel on Russian oil would have little immediate impact on Moscow’s revenues, as it is broadly in line with what Asian buyers are already paying, Reuters reports. The group of the world’s richest nations plan to implement the price cap on seaborne exports of Russian oil from 5 December.

Stable and effective regulation is needed to help get the EU’s wind power plans back on track, according to Reuters. The European Commission aims to install 39 gigawatts (GW) of new wind farms annually up to 2030, but only 18 GW per year is currently expected between 2022 and 2026.

The energy ministers of Saudi Arabia and Iraq have stressed the importance of sticking to OPEC+ oil output cuts that last until the end of 2023. The two sides also stressed “the ability to take further measures, if required, to achieve balance and stability in the market”, according to the Saudi Energy Ministry.

South Korea’s LG Chem plans to invest $3 billion in the construction of an electric vehicle (EV) components facility in the United States, Al Jazeera reports. The battery production plant in Tennessee will be the largest of its kind in the US, producing components to power 2 million EVs by 2027.

French energy company ENGIE and tech giant Google have agreed to a 12-year power purchase agreement to support Scotland’s Moray West offshore wind development project.

Nigeria’s state-owned NNPC has begun drilling for oil and gas at a field in northern Nigeria as the country seeks to produce crude outside the Niger Delta for the first time. President Muhammadu Buhari said the Kolmani project holds 1 billion barrels of oil reserves and 500 billion cubic feet of gas.

The executive board of Russian gas producer Gazprom has approved an investment programme worth 2.3 trillion roubles ($38 billion) for 2023. That’s an increase of 16% from this year, the company said.

Chinese oil and gas giant Sinopec says a new shale gas field in the southwest of the country holds nearly 146 billion cubic metres of proven reserves, buried 3,500 metres underground. The country is accelerating the development of costly, geologically challenging oil and gas resources following President Xi Jinping’s call to boost domestic energy supply.

Ecuador plans to invest $263 million to boost its electric connection with Peru. This is part of an initiative intended to help it replace thermal generation and cut energy costs.

2. Viet Nam plans to boost coal use

Viet Nam’s has increased its coal power target for 2030 under a revised draft energy plan, according to Reuters. Draft documents also show that the country is scaling back its renewable energy targets. It comes as G7 climate negotiators failed to clinch a financing deal with Viet Nam on a “Just Energy Transition Partnership” at COP27.

Viet Nam is one of the world’s top 20 coal users. Under the government’s latest baseline scenario, coal would remain its most important energy source until 2030 with more than 36 GW of installed capacity, up from around 21 GW in 2020 and 30 GW in 2025. Reuters says the country plans to build as many as 11 new coal-fired power plants in the coming years.

Vietnam plans to phase out coal use by 2050. Image: Reuters.

Viet Nam’s renewable energy production has recently expanded rapidly, but is now seen rising to only 21 GW by 2030 under the latest plans, down from a 26-39 GW target in a draft document in October. However it is seen reaching more than 200 GW by 2050, covering wind, solar and hydrogen plants. The figures exclude hydropower, which is traditionally a major power source in Viet Nam.

EU and other Western negotiators had hoped Viet Nam would become the second country to agree on a funding plan to speed up its reduction of coal use, after a similar deal last year with South Africa. But a series of upgraded offers worth billions of dollars, mostly in loans, failed to convince Vietnamese negotiators, who are believed to have wanted more grants and more control over the way the funds would be disbursed.

3. Lithium’s rapid price rise begins to slow

The price of a key material used in batteries for electric vehicles (EVs) is set to decline for a second consecutive week, on expectations of slowing EV sales, Bloombeg reports. The fall in lithium prices marks a notable reversal of recent trends – prices for the metal in China have almost tripled this year, and have risen 1,200% since 2020 as supply has struggled to keep up with surging demand.

Chinese government subsidies for EVs have encouraged rapid expansion over the past 10 years, but are due to be phased out at the end of 2022. Chinese EV manufacturer BYD CO has already raised the price of some vehicles, saying that changes in subsidies and erratic input costs have driven the move.

Beijing has urged battery producers to avoid “vicious competition” and says it will punish companies for hoarding or price speculation. “Overall fundamentals will support lithium prices to stay comparatively elevated in the next three to six months, as long as global economic growth can help maintain healthy EV demand next year,” said Susan Zou, an analyst at Rystad Energy.

But analysts at Morgan Stanley say “there is likely to be some price pullback when underlying demand for EVs starts to weaken sequentially, and industry players may become more cautious about placing orders and building inventory.”

4. More on energy from Agenda

https://cdn.jwplayer.com/players/gy26lfu5-ncRE1zO6.html

Offshore wind farms are hitting the headlines for their size and for gaining government backing across the globe. Boosting offshore wind power is seen as a way to reduce reliance on fossil fuels and speed the journey to net zero, and it can also create jobs and economic growth.

We are living through the first global energy crisis and it’s even worse than the oil crisis of the 1970s. Nuclear power can provide a significant contribution to security of energy supply and independence, says Stefan Buono, Founder and CEO of newcleo.

The World Trade Organization’s annual report says trade barriers are holding back the use of low-carbon technologies needed to tackle climate change. Developing countries that are more open to trade will have a greater capacity to adapt to the impacts of global warming, it adds.

To learn more about the work of the Energy, Materials, Infrastructure Platform, contact Anne Therese Andersen: AnneTherese.Andersen@weforum.org

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