Net zero restrictions on oil drilling are tightening Saudi Arabia’s grip over the global market for crude and will deepen tensions with the West, the International Energy Agency (IEA) has warned.
Green rules which limit new oil fields mean that the Saudi-led Opec cartel will come to control 52pc of the market, the agency said, compared to just over a third now.
In its annual energy outlook published on Thursday, the IEA said that “geopolitical tensions” are overshadowing energy markets.
However, it added that Vladimir Putin had squandered Russia’s role as an energy superpower by cutting gas flows following the invasion of Ukraine. The IEA predicted that Russian fossil fuel exports will never return to 2021 levels as a result.
Warning that the growing power of Opec will lead to opposition in the West, it said: “It cannot be taken for granted that importers will be comfortable with such a concentration in supply.”
The warning is significant at a time of deep division between the US, a key IEA member, and Opec over oil supplies amid a global cost-of-living crisis and Russia’s war on Ukraine.
Opec and allies including Russia decided this month to cut oil supplies by two million barrels per day, snubbing a request from President Joe Biden to bring down prices by boosting supplies.
The White House accused the cartel of “aligning with Russia”, while experts said Moscow would benefit from higher oil prices.
President Biden has responded by releasing crude from the US strategic reserve, prompting a veiled rebuke from Saudi’s energy minister this week who said countries were using oil stocks to “manipulate markets”.
The IEA sent shockwaves around the world in May 2021 when it said that no new oil and gas fields would be needed if demand is successfully cut so that global carbon emissions reach net zero by 2050.
This was considered a major change of course by the group, which was previously regarded as a champion of the oil and gas industry.
Since then, energy markets have suffered a major shock because of natural gas shortages driven by Russia’s invasion of Ukraine.
Soaring prices have wreaked economic havoc across major economies, with governments forced to spend billions to shield consumers from rising prices.
Oil prices have also risen as traders shun Russian supplies, while refinery closures have added to price at the pump. In the US, President Biden is desperate to rein in prices ahead of mid-term elections next month.
Meanwhile, demand for oil and gas has risen, the IEA said, and several new projects have been approved.
The IEA said lost Russian supplies would need to be replaced in part by new production.
