The Organisation of Petroleum Exporting Countries (OPEC) says the ongoing war between Russia and Ukraine had serious ramifications for the energy industry.
Mr Mohammad Barkindo, OPEC Secretary-General, said this during the 15th High-level Meeting of the European Union-OPEC Energy Dialogue on Monday in Vienna, Austria.
Barkindo said that the war in Ukraine could have significant consequences on many fronts, including geopolitics, the global economy and even the world order itself.
“The ramifications for the energy industry are serious, as we are witnessing economic volatility that is elevating the risk premiums for oil and other important commodities that the world counts on each and every day to function.
“Both Ukraine and the Russian Federation are key exporters of commodities and essential agricultural goods.
“We could potentially see the loss of more than seven million barrels per day (mb/d) of Russian oil and other liquids exports, resulting from current and future sanctions or other voluntary actions,’’ he said.
Barkindo said the last major supply disruption of this magnitude was in 1978 and 1979, when 5.6 mb/d of oil were taken off the market.
He said at that time, spare capacity levels were at nine mb/d, nearly three times OPEC-10’s current levels, amounting to 3.3 mb/d.
Barkindo said other gross peak supply losses during the last 60 years were within the range of 1.5 to 4.3 mb/d.
“In 1980-1981 for example, there were losses of 4.1 mb/d, with spare capacity at 12.7 mb/d and in 1990-1991, we witnessed a loss of approximately 4.3 mb/d with spare capacity at 2.5 mb/d.
“Therefore, considering the current demand outlook, it would be nearly impossible to replace a loss in volumes of this magnitude.
“These crises have compounded to create a highly volatile market. I must point out, however, that these are non-fundamental factors that are out of our control,’’ he said.
On what needs to be done to mitigate the situation, he called for continued collaboration with non-OPEC partners the help support market stability and economic growth through joint decisions.
Barkindo said: “Two years ago, we helped rescue an industry in distress during the wake of the pandemic and have helped restore it to balance and growth.
“I am confident we will persevere once more with the current challenges we are facing.
“However, we will need the concerted efforts of global leaders to employ this stance of multilateralism to help secure a steady flow of energy to the world.
“We saw this first-hand in the early days of the pandemic as leading international organisations and institutions came together under the aegis of the G20 Energy Ministers Meeting to endorse efforts to stabilise the energy markets.
“This high level of cooperation provided pivotal support to the collective efforts undertaken by our Declaration of Cooperation participating countries.’’
He, therefore, urged global leaders to follow this example of multilateralism and once again ensure an unhindered, stable and secure flow of energy to the whole world.
“OPEC and our non-OPEC partners will continue to remain vigilant in monitoring the daily movements of the oil market, and will continue to meet each month to discuss the latest developments and act where necessary.’’
