The International Energy Agency on Friday urged governments to urgently implement measures to cut global oil consumption within months following supply fears stemming from Russia’s invasion of Ukraine.
The IEA also called on the OPEC+ group of oil-producing nations led by Saudi Arabia and Russia to help “relieve the strain” on markets, while warning that the world faced the biggest shock to supply “in decades.”
The outbreak of war in Ukraine has sent prices for the fuel up sharply and led to major economies, such as the United States and Canada, sanctioning Russia by banning imports of oil.
The IEA warned earlier this week of the risk of a global supply crisis as major oil companies, trading houses, shipping firms, and banks have shunned Russia.
With the threat that supplies of Russian oil could be cut even more, “there is a real risk that markets tighten further and oil prices escalate significantly in the coming months” as the world enters its peak demand season, the IEA said.
“As a result of Russia’s appalling aggression against Ukraine, the world may well be facing its biggest oil supply shock in decades, with huge implications for our economies and societies,” IEA Executive Director Fatih Birol said in a statement.
Increases in supply of the crucial commodity “would not be able to ease the current strains” after the “disappointing outcome” of a recent monthly meeting of OPEC+, the IEA report concluded.
The OPEC+ group has resisted US pressure to step up production for months, agreeing only to modest increases in output at its regular meetings, even after Russia invaded Ukraine.
The IEA was hoping for “some good messages which could help to relieve the strain on the oil markets” after the group’s next meeting on March 31, Birol said at a press conference to present a plan to cut demand.
The 10 proposals put forward by the IEA could cut oil consumption among advanced economies “by 2.7 million barrels a day within the next four months,” it said.
The measures, put forward together with the French government, could reduce consumption among those countries by 2.7 million barrels a day, while these currently consume between 44 and 45 million barrels a day, according to IEA estimates.
Together the world’s advanced economies account for around 45 percent of global oil demand, it said.
The proposals, principally targeted at transport, included reducing speed limits, working from home three days a week, car-free Sundays, cheaper public transport and greater use of long-distance trains over planes.
In the Philippines, the high cost of crude has resulted in sharp increases in pump prices.
But earlier this week, the Department of Energy (DOE) said an oil price rollback of P12 per liter for diesel and P5 per liter for gasoline was possible next week as world oil prices declined sharply.
Energy Secretary Alfonso Cusi said the lockdown in China because of COVID-19 with projections of lower demand and the ongoing talks between Russia and Ukraine tempered oil price increases globally.
He said gasoline has gone up by P31.85 per liter, diesel by P40.35 per liter and kerosene by P32.93 per liter and cooking gas or LPG by P20 per kilo since January.
He also said there is enough oil supply despite the uncertainties brought about by Russia’s invasion of Ukraine.
Meanwhile, President Rodrigo Duterte offered very little relief from skyrocketing fuel prices Wednesday, rejecting mounting calls to suspend the excise tax on oil products and offering instead a P200-per-month subsidy to poor families for the rest of the year—or the equivalent of only P6.66 a day.
Acting Palace spokesman Martin Andanar said the President turned down the proposal to suspend the excise tax on fuel, saying the subsidy for poor families was “a more equitable response” since lowering the price of gas and diesel by cutting taxes would only benefit “richer people” who have cars.
The explanation did not take into account the owners of 4 million registered motorcycles in 2021 who also need to gas up.
“President Duterte has approved of the Department of Finance’s recommendation to retain the fuel excise tax under the Tax Reform for Acceleration and Inclusion (TRAIN) Law amid the continuing increase of oil and petroleum products prices,” Andanar said.
The DOF had argued that suspending excise tax on fuel provided under the TRAIN Law will result in a loss of P105.9 billion in government revenues that could be used to fund several administration programs.
Andanar said the President instead approved the DOF recommendation to provide P200 in monthly subsidies or ayuda to poor households for one year, at a cost of P33.1 billion.