Oil supply will not be affected by stricter price ceiling enforcement, says the IEA

HIROSHIMA, Japan, May 21 (Reuters) – The International Energy Agency (IEA) does not expect moves by the Group of Seven nations to counter Russian energy price cap evasion to change the supply situation for crude oil and oil products. IEA Executive Director Fatih Birol said.

The G7, the EU and Australia agreed to impose a $60 per barrel price cap on Russian seaborne crude and also set a price ceiling for Russian oil products to deprive Moscow of revenue for its invasion of Ukraine.

The G7 will step up efforts to counter tariff evasion “while avoiding spillovers and maintaining global energy supplies,” the group said Saturday, without giving details, at its annual leaders’ meeting.

The IEA, which provides analysis and input to the G7 on energy, does not see the improved enforcement of price caps affecting global oil and fuel supplies, Birol told Reuters in an interview on the sidelines of the summit.

“Any significant changes in the markets as always we will reflect in our analysis, in our reports, but for now I see no reason to make a change in our analysis,” he said.

According to Birol, the price ceiling achieved two main goals: it did not trigger tightness in the markets as Russian oil continued to flow, but at the same time Moscow’s income was reduced.

“Russia played the energy card, and it failed. But there are some loopholes, some challenges for a better functioning of the oil price ceiling,” Birol said.

GAS INVESTMENTS

The G7 also brought support for the gas investment back into communication on Saturday in what it said was a “temporary” solution to address potential market shortfalls and as nations seek to disconnect from Russian energy.

The move has alarmed climate activists who warned the group could fail to meet its goal of achieving net zero carbon emissions by 2050 and limiting global warming to 1.5 degrees Celsius (2.7 Fahrenheit).

“It may have some impact, but countries reiterated that if there are any impacts to slow down in that area, they are going to accelerate in the other areas that it will not change their decision to reach the 1.5 degree Celsius target ,” Birol said.

“The clean energy transition is happening and much faster than many people think.”

The language change was brought in by Germany, once a top buyer of Russian gas, sources have said, and the communication did not include a time frame for investments in the gas sector.

“There is no determination of any time frame there, but I think the main issue is because of the dependence 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 it clear again and again that Germany is very committed to reaching this goal of 1.5 degrees. And I believe his word.”

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

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