Bronwen Maddox
Hello, everyone, welcome to Chatham House. I’m Bronwen Maddox, the Director. We are really delighted to be having Dr Fatih Birol here today. I say, in many of the discussions we’re having at the moment, it couldn’t be more timely. I’m going to square that for this one. Energy is in almost every conversation we have, almost every piece of news that is happening. Let me just say a few things by way of introduction, because they are so relevant to every bit of what Dr Birol is doing at the International Energy Agency and what it is doing about the world’s crises.
He’s served as Executive Director of the IEA since 2015, having joined in 1995, and he’s led its most significant modernisation, which expanded its mandate beyond oil, to include electricity, natural gas, renewables and critical minerals and strengthening engagement with emerging economies. And we were just talking about the applications for membership and the discussion on that that is going on at the moment. And these have broadened the IEA’s global reach to cover over 80% of global energy demand. It has really reinforced its role in international energy security, including responses to the crises such as Russia’s 2022 invasion of Ukraine and the one that is in our title today.
And he’s a longstanding advocate for energy access. He’s championed electricity and clean cooking solutions, particularly in Africa. He’s been named to the Time 100 list of the world’s “most influential people” twice, in 2021 and 2026, and has had numerous international honours. And with that, let me say a second welcome to Chatham House…
Dr Fatih Birol
Thank you.
Bronwen Maddox
…because we are fascinated about this discussion. Thank you.
Dr Fatih Birol
Thank you very much. No, thank you very much for inviting me, thank you.
Bronwen Maddox
We’ve got too much to talk about, but I wanted to start just with a brief question about the IEA’s mission, because I think people aren’t always clear about what it – it was set up after the 1973 oil…
Dr Fatih Birol
Yes.
Bronwen Maddox
…crisis, what it is trying to do.
Dr Fatih Birol
So, you are completely right, we were founded as a response to the 1973 oil crisis, and the main idea was IEA countries to have oil security mechanisms and in the case of oil supply disruption, to make the IEA as a part of the solution. And the – it was oil and the membership was confined to the rich country – advanced countries for many years, like that. And 2015, as you rightly mentioned, I became the head of the agency and we have started to change the mandate, or, you know, the – improve the mandate, I should say. In addition to oil, we look at all other energy sources, start of gas, renewables and nuclear power, the electricity, everything, climate change, these issues. Plus, we open the door of the IEA to emerging world, Asia, Africa and others.
So, as you rightly mentioned, we are very happy to see many countries now want to join. Last week I got a letter from the Nigerian Government. They want to be a part of the IEA, and I also had a good discussion with the Oil Ministry of the United Arab Emirates to establish dialogue to have institution ties within IEA and the UAE. So, many countries are now part of the IEA family, if I may say so. We work on these issues, and we are a intergovernmental organisation. Our members are governments around the world, but of course, we work with the energy industry, with the financial industry, with the NGOs and everybody. We have altogether, IEA family, more than 60 countries, not everybody, but we make our work on global issues, including the Africa is a main preoccupation for us.
Bronwen Maddox
One of the points I was driving at, though, is your mission is to try to improve security and improve what I might call the energy transition.
Dr Fatih Birol
And the – improving the energy security, but also, we look at the other areas that could help the betterment of this world and the humanity, including the climate change.
Bronwen Maddox
So, with that set out, let’s dive into the crisis that is inescapable and is the title of our discussion today. You’ve called this “the largest energy crisis in history.”
Dr Fatih Birol
Yeah.
Bronwen Maddox
Why did you say that?
Dr Fatih Birol
Now, when – on 28th of February, when this started, we understood that it was a major issue, because it is happening in the – in Middle East, the capital of the major oil and gas exporting countries. Since what IEA says is implications for the markets, I told my colleagues and myself, “We don’t talk to press and we don’t go to events to share our views and just observe what’s happening in the markets, to take note and closely monitor the markets.” But after three weeks, and at the weekend, I look at the numbers a bit and the amount of oil and gas lost vis-à-vis the attention from governments, I saw a major decalage, major gap there. So, it is not well appreciated. So, I went to check the numbers with my colleagues, and I decided to go out to call it “the largest energy crisis in the world.”
Why? It’s very simple. Up to now, we had three major energy crisis, 73, 79, two major oil crisis, and 2022, after the Russia invasion of Ukraine in Europe, with the gas. So, there’s three of them. These are three largest one until now. In 1973, the world has lost five million barrels per day of oil. 79, also five million barrels per day. We put together in both of the two largest oil shocks in the world, we lost ten million, and in this crisis, we already lost 14 million, much higher than that.
Bronwen Maddox
Much higher than both put together?
Dr Fatih Birol
Put together, combined, and for gas, in Europe, after the Russia cut the gas, we lost about 75 BCM and we now lost more than 130 BCM. So, it means this crisis is bigger, I will say much bigger, than all three crisis in the history put together. Plus, there is a important plus, that many people, especially energy and gas, they don’t see it clearly, the huge amount of other vital commodities pass through the Strait of Hormuz, such as fertilisers, such as petrochemicals, such as helium, such as sulphur, and this will have major implications for the world, for the economy and for many countries, especially those in the developing and emerging world.
Bronwen Maddox
Hmmm. So, the IEA put out its global Outlook last week. It’s difficult exercise, given that, in a sense, it requires the agency to take a view on these things. What is the view that you are taking on where this goes? And we have this debate many, many times at the moment on this panel, and obviously, people do not have the same views. We’ve had a long series of Middle Eastern discussions recently on this, but I’m interested in your view.
Dr Fatih Birol
Yeah, thank you. I would say, now, currently, oil prices are about 100 – close to $110. It is compared to the before this war has started, it is almost double. There’s a significant increase there but now comes the story. The – before the war has started, we were saying it – yeah, and it was the numbers again, we are a number driven organisation, data driven organisation. There was a lot of surplus of oil in the markets, lots of buffer, if you say so. We have – therefore, we are fortunate that enter this crisis with a lot of oil in the markets. This helped a lot to absorb the shock.
Second, we at the IEA, maybe you may be aware, on 11th of March, we released huge amount of oil stocks to the markets. It is also helping, and third, now this is important, countries, the minica – the industry, the commercial players, they have stocks for the – that’s also a buffer zone. We are now using these stocks as well, but all of them put together is not a solution to the problem. Single most important solution to the problem is fully and unconditional opening of Strait of Hormuz.
Now, what happens if it is not open? This is the story. If it is not – and these stocks we have, it is eroding. It’s going to be – if you have – I mean, if you have money in the pocket and if you don’t have income coming, I mean, you can spend, spend, but then there is the end of it. This is the outcome at the end of it, and the problem is end of June/early July, the travel season starts. What does it mean? The – typically, oil demand, oil consumption goes up. So, these two things, the stocks are eroding, not new oil is coming from Middle East and the demand is increasing. This may be difficult and we may be entering the red zone in July or August, if we don’t see that there are some improvements in this situation. This is how I see it.
Bronwen Maddox
And just by the ‘red zone’, what do you mean?
Dr Fatih Birol
Is a zone which is red. So, as you said…
Bronwen Maddox
There you go. What do you say to the argument – we’ve had quite a lot of people whose livelihood depends on losing…
Dr Fatih Birol
Exactly.
Bronwen Maddox
…things through the Strait of Hormuz, and a lot of discussions about fertiliser…
Dr Fatih Birol
Yeah, exactly.
Bronwen Maddox
…saying, “Look, this – at the moment, there’s no alternative.”
Dr Fatih Birol
Yeah.
Bronwen Maddox
But there is a risk Iran overplays its hand. We’ll find other ways of getting this out.
Dr Fatih Birol
Yeah.
Bronwen Maddox
This will ease over some years, whether it is pipelines or…
Dr Fatih Birol
Yeah.
Bronwen Maddox
…other transport across Saudi Arabia, whether it is through Oman and so on. Obviously, the shock has given everyone and incentive to find alternatives. Do you have any faith that those can come through quickly and alleviate this pressure?
Dr Fatih Birol
I am really – energy situation I try to summarise to you, but I am – as much as energy, I am worried about the agriculture sector and the food. So, why I am worried, it is the following. So, we have many important crops, but three of them are the backbone of the agriculture sector, which is the wheat, which is the rice and maize. And when you look at them, about 60% of their production cost comes from fertiliser and diesel. They are both – these prices are both increasing and as we are approaching the travelling season, we are also approaching, in many countries, the planting season, farming season.
And many Farmers would have – will have difficulties in this context to go ahead as they were doing in a normal year and this may val – feed into higher food prices, and higher food prices, together with the higher oil prices, may push up the inflation. And we are already seeing the first signals of the inflation, numbers are going up here and there, and it is just the beginning. My real hope is that, of course, the strait is open fully and unconditionally, and here, also, I want to say there is open and open.
Bronwen Maddox
That is a very good point.
Dr Fatih Birol
This is – what I mean is that if it is open and if there are still some geopolitical uncertainties, if the actors don’t see it commercially reliable to bring their goods through the channel, it is still – it may still means some volatility.
Bronwen Maddox
Hmmm, no, I’m so – and I’m very glad you made this point about fertiliser. We’re very conscious that this is a year when also, people are predicting perhaps very hot weather, through El Niño and so on, that some countries are going to be in a lot of difficulty. Let’s turn to the clean energy front, though. One of the…
Dr Fatih Birol
Of course.
Bronwen Maddox
…to me, astonishing figures in your report was that 30% of sales this year of electric – of vehicles were electric vehicles.
Dr Fatih Birol
Yeah.
Bronwen Maddox
Up from about 5%…
Dr Fatih Birol
Exactly.
Bronwen Maddox
…half a decade ago. Can you just talk to us about what you think is happening there…
Dr Fatih Birol
Of course.
Bronwen Maddox
…and what the pattern…
Dr Fatih Birol
Of course.
Bronwen Maddox
…is?
Dr Fatih Birol
The – now, you are right, it’s – five/six years ago, only 5% of all the cars sold was electric, and this year, we expect about 30%. And I have to put a disclaimer here, I expect many countries, they will react to this crisis, many countries around the world. That is, they have been – they have done, in the 1970s. They may give a push to the electric cars penetration, given subsidies and so on. We always – they are two/three doing. We say that this year, even without considering this addition, the policies we may coming, this year, from 5% five years ago, it will reach about 30%. And this is very important and if people think it is only China, it is wrong.
It’s happening in China. In China today, almost 60% of all the cars sold is electric, but now we are – when we look at the numbers, especially in Southeast Asia, which is a very important centre for energy demand quote, we see electric cars penetration’s very, very high. And this would have implications for the car manufacturing industry, but also for the energy industry, as well. And this is the – and plus, not far, but one or two years later, if you invite me again next year, I think I will be also speaking about the electric trucks, as well. So, this is the – this is also in the – in making, here, the trucks may be also coming, and we see some countries already started.
Bronwen Maddox
Hmmm, and in this picture of trends towards clean energy, what has been the effect of the – this US administration changing US policy, obviously, reversing the Joe Biden administration, big subsidies for clean technology through the…
Dr Fatih Birol
Yeah.
Bronwen Maddox
…Inflation Reduction Act and saying no? That we do always rush to point out the US is a complicated country and the states have some freedom to do their own. What has been the effect of that shift in policy?
Dr Fatih Birol
Yeah. I will answer this, but before that, if I can make a small addition to my previous answer inspired by your – this question. Now, why electric cars are penetrating the market so fast, to be very frank with you, it is very little to do it being clean, okay? So, it is because it is – in many countries, there are subsidies and it is becoming cheap compared to that, in – especially in Southeast Asia. You will see that electric cars in Southeast Asia is now beca – becoming a major competitor to established car exporters, Japan and Korea, which are – which have tradition internal combustion engine cars. Okay, I finished this story, and what I want to say is that the electric car growth because the same is happening at the renewable energies, they are not driven because of the climate change concerns, cleanness concerns, but they are becoming cheap.
For this question you mentioned, yes, US Government policy is – current administration policy is very different than the previous administration, but when I look at globally, I give you one number, which is – I find it myself very interesting. Last year, 2025, we look at all the power plants installed in the world, in the entire world, the oil, gas, nuclear, coal, blah – everything. Of all power plants installed in the world, 75% are renewables. 25% everything else put together, the coal, natural gas, nuclear power, everything 25%, renewals 75%.
Why it is the case? Because – again, not because necessarily for climate change reasons, because renewables, especially solar, is getting cheaper and easy to install. So, it’s – if we had this discussion 15 years ago, right, solar was a – or renewables were – it was a romantic idea. Solar, it’s very nice, blah, blah, but now it is cheap. People are going for – because it is cheap. So, I believe there is a non-political dimension of renewables, electric cars and others, but one other technology which is making very strong penetration and there’s a lot of appetite for it, is also nuclear power, and I see that nuclear power, as we have predicted three years ago, nuclear power is making a very strong comeback around the world.
Bronwen Maddox
I can that you’re doing extremely well, if I may say so, to keep focusing on the non-political dimension. Nonetheless…
Dr Fatih Birol
This is my job. This is my – I say…
Bronwen Maddox
Nonetheless…
Dr Fatih Birol
Yes.
Bronwen Maddox
…the US, as I said, has changed its policy in, you know, in a way that it regards as a point of principle, and I was asking about the effect of that change of US policy on this pattern overall.
Dr Fatih Birol
So, I think it is – US is the largest economy in the world and the decisions made in the US have implications for – of course, for that country, but also for the world. US Government is different priorities now, and we see the impact of these priorities in the US energy system and beyond. So – or the – both the renewables and the electric car penetration in the United States now is slower than it was before and we see, for example, coal, there’s a coal use increase. There’s a strong interest in nuclear power and the others there’s definitely a change. But when I look at globally, I still see that the renewables growth is strong, from Vietnam to UK, from UK to Canada, from Canada to Africa. Again, these are not necessarily policy-driven but driven by the – it is economics and it is easier to install compared to other options.
Bronwen Maddox
Hmmm. You’ve also worked very hard to say, look, the drive for energy security can be exactly in the same direction as decarbonisation. That to a country, you want more energy security? Well, look at renewables, nuclear and so on. But in some countries that doesn’t feel quite so simple, and we’re sitting in one of those countries.
Dr Fatih Birol
Yes.
Bronwen Maddox
And there’s obviously a lot of debate in the UK about whether to improve its energy security and protect itself against some of the energy prices, it should drill more in the North Sea for both oil and gas. What is your advice to the UK? And I realise you’re just about to go and see UK Ministers. I’m not trying to spoil your conversation with them.
Dr Fatih Birol
So, it’s – you say it is not simple in UK.
Bronwen Maddox
And…
Dr Fatih Birol
But…
Bronwen Maddox
…it’s not – it…
Dr Fatih Birol
But I’m…
Bronwen Maddox
For other countries as well, but…
Dr Fatih Birol
Yeah, but I – you are not the exception in the UK. It is nowhere it is simple; I can tell you. If you – there is no one country I go and I think that is a simple black and white. It is not a black and white. The beauty of energy is everything is in between, the grey and the good and bad. It’s not so easy. It – sometimes cost is high, but it is good for the people. Sometime it is very cheap but not good for the people. So, you have to find the right balance here.
So, when it comes to UK, the – I think the – I see, first of all, UK’s – future of UK energy system is electrification. So, you – I will come to North Sea in a moment, that – but UK will never, ever suddenly somebody will discover a lot of oil and gas in Leeds or in Manchester or something. It is – if there was something, we would have discovered this. The geological surveys are done. If UK wants to be a strong sovereign industrial country, I think – I see electrification is the future and therefore, we have to make sure that the – we build enough power plants, it can be renewables, it can be nuclear power, it can be natural gas, whatever, and we make the grids, etc.
Coming back to the North Sea. Now, I mentioned that the – you, yourself, mentioned 1970s oil crisis.
Bronwen Maddox
Hmmm.
Dr Fatih Birol
One of the reactions to that was the North Sea. So, North Sea is a reaction to these oil prices, high oil prices, and the insecurity of the oil markets. We have seen a big jump in North Sea production. In a very short period of time, government gave some tax reliefs, oil prices went high, and in a very short period of time, the North Sea production came to more than six million barrels per day. Which means today’s Iraq and Kuwait put together is a response to that, and this is definitely good for the energy security.
However, there are some facts. Oil fields are like human beings they may get tired. It means there are geological facts that if the – you produce, you produce, you produce and afterwards, you use the most of this energy or oil from these fields and in order to produce more, you have to make huge efforts, and a lot of money needs to go there. So, from my point of view, I mean, the – there are, for example, in the existing fields in the North Sea to make sure that they’re making most of these existing fields by the tiebacks and so on, this is common sense and we should do that. But by going to the fields which have never been the – explored yet, not developed yet, to make huge capital there and hope that with these efforts we are going to change the price of oil, is, in my view, is not right.
There is – today, United States is a big – largest the exporter of the world. US consumers have to deal with the international oil prices. There is one oil price, it will affect everybody. No country’s immune to that, and I don’t still understand how in UK this becomes a discussion. Honestly, I am amazed. I follow the US politics and the premiership very closely, since years, both of them. By the way, if there are any Arsenal fans, I want to congratulate them, in the meantime. So, I would say that – I mean, you are the grandchildren of Bertrand Russell, the logic, okay? This is – I don’t think that how UK can think you can have a impact on the international oil prices. You cannot. UK is a – whatever the field you produce, develop, UK is a price taker, not a price maker. It will stay like this.
So, I wanted to say it for once and make it clear. So, of course, it is up to UK Government authorities if they want to authorise the new phase exploration, if it take six/seven years, they can go ahead with it, but never expect that the amount of oil UK may produce from these fields, which they say might bring something, will change the international oil prices. Maybe after the comma they can change, yeah.
Bronwen Maddox
It would be illogical, to take your phrase. And so, I have more questions, but I know there are going to be quite a lot, and there are a lot online already. So, let me come to questions now. If we could have the lights up. I rather suspect the UK is going to come back in them, but let’s see. Okay, where shall we start? And thank you for them online. I’ll move this closer to me. Right, let me take them in pairs. So, let me take the front two here on the line. First in the middle and then…
Amir Shafaie
Thank you very much.
Bronwen Maddox
…second row.
Amir Shafaie
Amir Shafaie from Natural Resource Governance Institute. Dr Birol, you spoke about the biggest energy crisis in the world and at the same time, there are parallel processes, such as the transition away from fossil fuels, the roadmaps that are being discussed at a global level…
Dr Fatih Birol
Yeah.
Amir Shafaie
…and at national level. How do we ensure that these processes are not parallel universes, but actually speak to each other? And in particular, take into account, the UK example was given, but what about the poorer countries in the world, whether they’re importers of energy or exporters, how are these issues reconciled in today’s world? Thank you.
Bronwen Maddox
Thank you very much, indeed, and forwards.
Saja
Thank you. Thank you so much for presentation. My name’s Saja [inaudible – 29:13]. I am Academic in Yeditepe Üniversitesi in Turkey. My question is, how will energy transition shape the role of chokepoints like the Strait of Hormuz in global energy security? Thank you.
Bronwen Maddox
Thank you.
Dr Fatih Birol
Should I?
Bronwen Maddox
Yes, please.
Dr Fatih Birol
So, the first question. Now, when you look at the history, again, I imagine after the 73, 79, there were policy responses, strategic responses. It changed the global energy map, and it will be the same again. I can assure you in the next few years, many governments around the world will review their energy strategies and will look for new options in terms of the – whom they are going to trade, who are they – whom they are going to import energy, export energy. Which supply routes they will get their energy and which technologies they are going to choose, there will be a review process in many countries. ‘Cause in 1970s, the – we talk about nuclear. The birth of nuclear pow – industry was basically, as a result of the reaction to the oil industry there.
Or I’ll give you another example. In 1970s, when this crisis started, an average car, okay, to drive 100km, need about 20 litres of gasoline, but then car manufacturing industry went through a transformation, very shortly it became ten litres only for the – half. There is a car fuel efficiency came there. Or there are some other decisions, a geopolitical decision. Europe thought overreliance on Middle East is a mistake and Europe pivoted to Russia as alternative. So, they are different. Some of them may be right, some of them may be wrong.
Now, I believe this time it will be the same. In the energy business today, I go around the world, countries when they make a trade, a contract, buying LNG or buying a nuclear technology, in the past, before this crisis, the main criteria which country I buy my energy, the main criteria was, of course, which one is cheaper? Which is normal. But now they will think there’s other important thing, factor coming in, which is the trust, energy security risk premium. So, this country sells me for $3, the other one $4, so normally you go for three. But then you think about that but this three guy in the future may be a trouble for my economy, for my security. I better pay $1 more but feel that this country is a reliable country and predictable country.
So, this will change the game. This is the same thing will happen, and this will provide an opportunity for countries to improve their energy security, improve their ec – the transition to different fuels, including as you mention, the collec – the – if they want, so, decarbonisation, as well. But what I feel this time, renewables will get the additional push, electric cars, nuclear power, but in some countries, I see coal will get a push as well as a reliable source in many countries. But in general, I can say that domestic energies, which make economic sense, will get a push, I can tell you that.
For the second question, Hormuz. Now, if somebody applies to IEA, okay, everybody – institution, you make a interview, the typical question is first, we ask the person, the – apply for the job, “Why did you apply for this post?” This, I think it’s everywhere, universal question, why did they apply for this post? And – but in the IEA we want to understand they are coming to IEA or they are coming to Paris, because we are in Paris. Some people love Paris more than the other cities. So, we want to understand this way.
But the second question is if there has been, I should say, not there has been, “If the Strait of Hormuz is closed, what are the top three things you would do?” This was always a standard boring question, and we discuss this a lot and people thought this would never happen. It happen now, and as I call it, now, once this happen, it is a big thing, it changed a lot of things. I call it the vase is broken. You know, they put they flag, the – if this vase is broken from glass – from crystal, attributed to, “Yoohoo, you cannot put it back where it was.” So, therefore, I think many countries will look for different supply routes.
To Hormuz to regain its reputation as a no problem, easy to go state, they have to make the countries and the region has to make huge efforts, if it is at all possible. But I believe the countries in the region first, countries in the region will come up with different pipelines as supply routes, and we are seeing the first, how shall I say, first attempts there, Saudi Arabia, United Arab Emirates. And the – we also will see that the countries who are not in the region but export oil and gas, their hands will be stronger, who are considered as reliable exporters, will gain from this. So, there will be – in the oil and gas business, there would be a lot of – there will be a lot of configuration, the reconfiguration there, and the – I think the Middle East, which has been the centre of oil and gas export, to regain its reputation as a reliable region as a oil and gas export, is definitely – it is damaged, that – this reputation.
Bronwen Maddox
Thank you. Thank you for the question about chokepoints. We might come onto the separate one about China and critical minerals, a different kind of chokepoint.
Dr Fatih Birol
Of course.
Bronwen Maddox
Let me – oh, there’s lots of hands up. Right, right at the back and then right at the front, please, and I’m – well, actually, I’ll take three this time. So, I will those two because you’ve both been very patient, and then in the front.
Ron Bousso
Thank you very much. Ron Bousso from Reuters News. First of all, Dr Birol, I’d like to just thank you and Toril and the OMR team for doing amazing work during this conflict, really. I want to ask you about the – back to the question on Hormuz. We don’t know a lot about how it’s going to open, but what’s your expectation about the resumption of flow and production in the Middle East once there is some kind of normalisation of some sort?
Bronwen Maddox
Really interesting point. Thank you. You are – in front of you.
Mustafah
Thank you. Thank you, it’s Mustafah, member of the Chatham House. Have you noticed yet the reduction in consumption of oil and oil products, and if not, at what price level do you expect to see it? Thank you.
Bronwen Maddox
Also very interesting, and in the front here. Can we take three, please? And I’m going to take some online. There’s some very interesting ones we haven’t covered at all.
Dr Isaiah Ishaka Shitu Al-Mustapha
Thank you very much. I’m Dr Isaiah Ishaka Shitu Al-Mustapha, ex-pat in oil supply chain, particularly in Nigerian perspective. I’m a Lecturer as well at the University of West London. Dr Fatih Birol, welcome to Chatham House. My question is two in one. What is the benefit for Nigeria as a oil exporter in the last 60 years that has refining capacity challenge, where recently [inaudible – 37:31] has come to stay? What is the impact? What do you think you can advise Nigeria…
Dr Fatih Birol
Okay.
Dr Isaiah Ishaka Shitu Al-Mustapha
…joining IEA soon?
Second, if the Strait of Hormuz appears not open unconditionally, as you’ve said, by August, we don’t expect to enter the red zone, do you think IEA member states have strategic inventory reserves to release so that to cushion the effective of a supply disruption in the global energy systems? Thank you very much, Dr Birol.
Dr Fatih Birol
Thank you very much.
Bronwen Maddox
Thank you, three terrific questions. You are – I notice the first on ass – your assumptions about the resumption of production if Hormuz opens, then about have you seen – have you observed a drop in demand? If I’ve got your question right, and then about the benefit of Nigeria joining the IEA, and inventory reserves, are they enough?
Dr Fatih Birol
Yes, okay, and we can – if we release it. So, the first question, I want to thank the colleague that she men – he mentioned our Toril. Toril Bosoni is our oil market, head of the – he – she is our oil boss. So, to have a oil boss as a woman is very good, so we are very happy with – that I was very happy to give this – she does excellent work.
Now, we follow, also, the damage happen during the war and the energy facilities in the region. We see that refineries, oil and gas fields, pipelines, are – some of them are severely damaged. In some countries it will be easier to repair them after the – everything is settled down, hopefully soon, but in some countries, it will take some time. There countries, like for example, Saudi Arabia and Emirates, they have the – both access to best technologies, they have financial muscles. It will be easier for them, even though, for example, our colleagues in Emirates think that it will take one year for them to come to the full production level be – as it was before the war.
But my worry is for the countries who don’t have these financial capabilities, such as – my biggest worry is Iraq. Why Iraq? For two reasons. Iraq is unlike other countries. Iraq’s – first, Iraq’s government revenues, more than 90% comes from the oil exports and with this, government pays 50 million people their salaries, the pensioners, the army, the government employees and so on, and Iraq’s revenues went down substantially now. Plus, it is going to be technical, but it is important to understand, in Saudi Arabia and other countries, you produce oil. If you aren’t able to export everything, we have storage. You can put them in the storage, it can wait there and you can use later and – but in Iraq, we don’t have the storage capacity, and we are shutting in the fields.
And once a field is shut in, to bring it up again is not a easy thing. It need – it requires technology, it requires money. So, therefore, I believe it will take a lot of time, both in terms of production and the refining capacity, to come to 27th of February. It will change from country to country. If the Emirates says officially, it will take one year for them, for countries who are not as fortunate as Emirates with the financial muscles, may take longer. But I will bring your thanks to Toril, as well, thank you very much for that.
The second question our colleague ask was about the…
Bronwen Maddox
Have you observed a drop in demand? Have I got your question…?
Dr Fatih Birol
Oh, consumption, exactly, consumption.
Bronwen Maddox
Have you got you – were you – consumption, have I got…
Dr Fatih Birol
Consumption, exactly.
Bronwen Maddox
…your question…?
Dr Fatih Birol
Exactly. So, the consumption is, of course, going down because of the higher prices and also, because of the – in some countries, there is rationing and some measures are taken, especially the Asian countries, because Asia is at the forefront of this problem. Because the Asia – 80% of the Asian oil went through Hormuz and 90% of the Asian gas went through Hormuz. Asia is at the forefront. So, we are seeing this and many countries are putting these measures and as a result of that, we are seeing the global oil demand is already declining. It will continue to decline and if the price go even higher, of course, it will be even more pronounced, this decline.
Nigeria, so are you from Nigeria?
Dr Isaiah Ishaka Shitu Al-Mustapha
Yes, from Nigeria.
Dr Fatih Birol
Okay, thank you very much. So, I want to also thank you for Victor Osimhen. Do you know this is a football player; he appears in my football team? So, thank you very much. He made us…
Dr Isaiah Ishaka Shitu Al-Mustapha
Okay.
Dr Fatih Birol
…champions, so thank you very much for the – I thanked, also, the Minister and Minister decided not to apply to IEA membership, but nothing to do with Osimhen, of course. They want – he thought IEA is a useful institution and I am very happy that Nigeria wants to be a part of the IEA. This is the first time that an OPEC country wants to be a part of the IEA, and Nigeria is a giant, with 260 million people, lots of oil, gas, but huge problems, access to energy. So, it – can you believe it? I – it’s so rich, lots of oil, lots of gas, but a big chunk of the population has still no access to energy.
So, with Nigeria we are going to work very close together to make sure that they make the most out of these energy resources and brings, hopefully, prosperity to its own population. This will be our aim to work with Nigeria.
Bronwen Maddox
Hmmm. I was there last year, and energy was a big part of the conversation. Yeah, but also, you had a question about inventory and reserves and…
Dr Fatih Birol
Ah, sorry, I wanted to come to…
Bronwen Maddox
Oh.
Dr Fatih Birol
This is a – so, what happened is that on 11th of March, we released 400 million barrels of oil to the markets, and as soon as it was heard, oil prices went down by $20. And today, those stocks, and it’s coming still to the markets, on average, 2.5 to three million barrels per day of oil is coming to the markets to begin providing a buffer zone. It was the highest, but at the same time, the decision of our member governments was unanimous. It’s give a lot of strength to me to – in front of the public to say that it’s a unanimous decision of all IEA member countries, an historic release.
It was historic, but it is only 20% of the stocks we have. 80% is still here. So, if the countries decide if they think it is the right time, looking at the market conditions, discussing with the – we discuss with our member countries, assess the market conditions, the IEA is ready to act immediately when and if it is necessary.
Bronwen Maddox
Okay, thanks. I’m going to – I’m absolutely coming back to the hall, but let me just take a few online, which have brought up points that haven’t come in so far.
Dr Fatih Birol
Please.
Bronwen Maddox
One from Mira Shah about, “What’s the impact of the scaling up of datacentres round the world?” One from Alina Safanova about the impact of the “UAE’s withdrawal from OPEC,” and others about how you “assess the damage to Iran’s own capacity.”
Dr Fatih Birol
Okay. So, let me start with the datacentres. We are seeing that there is a big race, United States, China, Europe, India, Middle East, to be a frontrunner in the artificial intelligence, who will be the frontrunner? Because in my view, artificial intelligence is the – perhaps the most consequential technological innovation in the human history and this is – for this you need datacentres, and datacentres are, for the colleagues who are not working on this all the time, 24/7 they need electricity. Not even one second you can miss it, and they are very electricity hungry. So, there is no AI without electricity.
In my view, who will win among the countries this AI race will depend on who will have a – who has a lot of electricity available and also affordable. And therefore, the datacentres are – in the United States especially, in China, in Europe, they want to find their electricity providers, and this is giving a big push to the gas fired power plants, renewables in some cases, and small modular reactors, in some countries. And since the technology companies have lot of money, they have deep pockets, they can buy the electricity, but this will also have a effect on the rest of the economy that datacentres are consuming so much electricity. It’s a long story, but I stop here.
The second question was the – on the issue of…
Bronwen Maddox
The UAE coming out of…
Dr Fatih Birol
The UAE coming – okay.
Bronwen Maddox
…OPEC.
Dr Fatih Birol
UAE left OPEC and according to the – my discussion with the UAE Minister, which we made it public, ten days ago, they said that they want to choose a way that their exports are not restricted and they want to be a part of the oil exporting countries that are not a member of OPEC. And also, as I mentioned, I was very happy that the UAE Government has expet – expressed interest to establish institution ties with the International Energy Agency, which is a very good mis – we worked with them very closely during the COP28 Presidents of the Emirates – with the COP28 President, Dr Sultan Al Jaber, and others.
I know that the Emirates has plans, ambitious plans, to increase the production, exports and they are also working hard to have alternative pipelines bypassing the Strait of Hormuz, to bring the oil to the markets. And the – if the – when the, I should say, this war is over, if the UAE can realise its plans, it will definitely be comf – will provide comfort to the oil markets. And the last question was?
Bronwen Maddox
Around zone capacity, how to…
Dr Fatih Birol
So, Iran still has some storage capacity, but it is not – unless – and I think that it will be one of the areas that one has to look careful, how much storage capacity Iran still has, but the country’s definitely going through difficult times for the oil industry perspective, as well.
Bronwen Maddox
Hmmm, and that is a crucial point. We’re not going to dwell on it here, but it’s one of the things that pushes Iran towards itself wanting an end to this, why…
Dr Fatih Birol
I don’t want to go into politics of this, so ask me the numbers. I give you numbers, so sorry.
Bronwen Maddox
We have some more questions, even those about numbers. Right, one over here, and then one here, one here. You’ve been very patient, and I – we do have time for more, as well [pause]. Go ahead.
Kelly Norways
Hi, Kelly Norways from S&P Global Energy. So, you mentioned that you have about 80% of fuel, kind of, collective stocks still available for potential release. Would you be able to, hypothetically, release that full volume? Clearly, these countries won’t allow their stock levels to go to zero. How much room do you have, additionally, for future stock releases, or perhaps to increase the drawdown – the rate of the drawdown that you’re seeing at the moment? Thanks.
Bronwen Maddox
Really, interesting, thank you. Here on the aisle.
Ved Shivakumar
[Pause] Hi. I wanted to ask, firstly, on…
Bronwen Maddox
Forgive me…
Ved Shivakumar
…to what extent do you think…?
Bronwen Maddox
…would you like to say who you are?
Ved Shivakumar
Oh, yeah, sorry, my name is Ved. I’m a student and I’m studying public policy at UCL. I wanted to ask a question on – regarding developing policies, so especially India, Pakistan, etc., etc., which are already facing…
Dr Fatih Birol
Yeah.
Ved Shivakumar
…such big impacts on – but especially within the rural, kind of, poor populations, what can they do now? Like, is it sense of, obviously, they can shift – try and shift to renewables, but then they ha – face the issue of development? So, what is your, kind of, insight? Amidst this political turmoil, which is going on, what is the strategy, do you think, is best for them to try and ensure the safety and productivity for their people? Thank you.
Bronwen Maddox
Thank you very much, and here on the aisle. Thanks for your patience.
Kaan Mizrakli
Thank you. My name is Kaan Mizrakli. I’m a student at UCL. So, the IEA is historically an American institute, right, American pushed? My question is, with the current war in Hormuz and artificial intelligence, sort of, being pushed by both sides, China and America, do you think that this war benefits more a systematic change, or is it genuinely an issue? Because you have governments like the UK, like Europe, who are genuinely pushing because they don’t want a depression in their countries. Whereas you have America and China who are trying to have systematic change while under the guise of a crisis. So, my question is, do you think that the IEA is genuinely a international institute or if it maintains its American Cold War origins?
Bronwen Maddox
Awful lot of things, including assumptions of who – forgive me, packed into that question.
Dr Fatih Birol
Yes, okay, that is…
Bronwen Maddox
I’ll be very interested of how you tackle it. Okay, we have one about the stocks available for release, which is very interesting, about what developing countries and particularly India/Pakistan, what do they do? And the challenges, I’m going to put it, of the…
Dr Fatih Birol
Perfect.
Bronwen Maddox
…last one.
Dr Fatih Birol
Thank you very much. So, let me start with your question. We have still 80% of our stocks. We – how much and if we release these stocks will depend on the – how the markets will evolve and whether or not our member governments decide that we should release, and when to release and how much to release will depend on all these conditions, the markets and markets and markets. Do we see a supply disruption that justifies, that needs IEA involvement there?
The question about developing countries, this is a – this is the major problem. I said that Asia is at the forefront of the – this crisis, but within Asia it is the developing countries. India, Pakistan, Bangladesh, even you go further to, start to say Philippines, these countries are in trouble and one of the things that is not coming in the media we read is the LPG, which is for cooking, very important in these countries. There is a major problem because these countries were getting a big chunk of their LPG from the Strait of Hormuz.
Now, what to do, what they have to do in the short-term and long-term? In the short-term, I think they have to find other suppliers, and it is not easy to completely substitute the LPG or other products they are – they were coming from Middle East, but at least some of it. And the second is that they have to ration. They are do rationing and using some measures to reduce the demand. We have also made some suggestions to countries how to save oil in a hurry, by practical things, working from home, making the public transportation for free, [inaudible – 54:47] in some countries and there are some suggestions they have to make reserve. This is the – in the short-term, these measures.
But in the longer-term, I think they should, and I believe they will, review their energy strategies that the economy can be held hostage for a 50km of a strait whether it is closed or open. It’s a very risky business in my view. There’s a need for diversification and I think they will look at this diversification issue very carefully. But I can tell you, we talk about the US, China, UK, Europe, but the biggest pain of this crisis will be felt in developing Asia and Africa.
Bronwen Maddox
Yeah.
Dr Fatih Birol
So, we didn’t talk about Africa a lot, but Africa has no involvement in this story.
Bronwen Maddox
We have a bit. We have a bit.
Dr Fatih Birol
You have a bit. Okay, I stopped Africa a bit here.
Bronwen Maddox
Oh.
Dr Fatih Birol
Then I come to the colleague about the US – IEA is a US institution. I categorically de – reject it, what you say, dear colleague. So, I – of course, United States is a distinguished member of the IEA, as well as other member countries. We take our decisions at – here, for example, we talk about the stock release, all the countries together in a unanimous way and the – we discuss all of our member countries and the US is definitely one of our member countries, which I respect, as I do for the other member countries, equally.
Bronwen Maddox
Thank you. Let me squeeze in one, maybe two more. Right, on the aisle, here in the middle.
Niall Henderson
Good afternoon. Niall Henderson, I work for one of the big IOCs. I won’t declare which one, but a slightly different question. Today’s energy system is a very centralised one, single-point generation sources, whether it’s CCGTs, nuclear power plants in Ukraine, big LNG facilities in Qatar. The wars that we’re seeing at the moment suggest it’s very vulnerable, yeah. It only takes a single rocket to wipe out a nuclear power plant. Energy security, do you think it’s going to – that will prompt a move from a centralised system to a more decentralised energy system?
Bronwen Maddox
And security from – whoever’s – and here in the front, please, and apologies to everyone. Suddenly, a lot of hands began to go up, which is human nature, but…
Paul Hawkins
Hello, Paul Hawkins, TRT World, and congratulations to Galatasaray winning the Super League.
Dr Fatih Birol
Of course.
Paul Hawkins
As you mentioned Arsenal, so I thought I’d say. You talked earlier about 75% of the world’s power plants generating renewable energy and that the future of the UK you think is electrification. Sounds like your advice to Ministers, UK Ministers, when you meet them, may be not to approve Jackdaw or Rosebank, and could you tell us a little bit about the distribution of energy? ‘Cause we talk about renewable energies, but particularly we’re thinking about the UK, the grid, that distributing the energy from Scotland, the renewable energy from Scotland, to the south, has been a big problem. So, could you just tell us a little bit more about that?
Bronwen Maddox
It’s a really interesting point. One of the things, it has made it very expensive. Alright, decentralisation of supplies, given how vulnerable big plants, whatever they are, including nuclear, are to say, a rocket, and musing on the UK’s dilemmas, not just the Jackdaw and Rosebank, but the grid and structure.
Dr Fatih Birol
Yeah. So, the first question is – maybe I put a bit of a bigger picture. I would say that the – and many of the – there are many, like yourself, many experts in geopolitics, but I see that the world is becoming a dangerous place. And in a dangerous place, energy security is a major priority for the countries. Energy security is becoming national security. We talk about oil and gas now, but the – in passing, you kindly mentioned, and it is very important for me and for our world, critical minerals, this also there is a very important energy security aspect of critical minerals and concentration, also there. Concentration is the worst thing for energy security. My golden rule number one in energy security is diversification.
So, therefore, the – we are seeing in the energy world, we are having the – we are monitoring it, the number of cyberattacks on the energy facilities are skyrocketing. It can be utilities, it can be grids and everything, which means I am putting this in order to answer our dear colleague’s question. I believe the – in the future, drawing lesson from this current crisis, I wouldn’t be surprised and I would make – in fact, recommend the countries to, if possible, not having everything centralised, but a distributed use of energy would reduce the risk. Not completely diminish but reduce the risks there.
And the renewables are providing a big opportunity for that, especially the solar, but wind or hydropower and others, small, mini hydro power. So, therefore, I wouldn’t be surprised, as a response to growing energy security risks, we may well see that the distributed energy is how should I say, getting more attention and more implementation. I have been dealing with energy several years. Energy and geopolitics were always interwoven, but I have never, ever seen that the dark and long shadow of geopolitics so much dominant on the energy sector.
Bronwen Maddox
Hmmm hmm.
Dr Fatih Birol
And as the energy person, I would like to see energy as a part of the economy, technology and so on, but this is not the…
Bronwen Maddox
Now it’s…
Dr Fatih Birol
In fact, it is…
Bronwen Maddox
…fused with these questions of politics and war…
Dr Fatih Birol
Exactly.
Bronwen Maddox
…from the – yeah.
Dr Fatih Birol
Exactly, this is definitely – I really – but this is not, of course, in our hands.
The question from the colleague, I will not – it is up to UK Government authorities to approve or not to approve this field, that field, that technology and so on. But I will tell them again, the UK oil prices are determined by the international markets, and it is even the case in the United States, or in, I don’t know, in Saudi Arabia or in Norway, the main exporters. So – oh, but when I look at the UK, if the government wants to come with a new strategy, new thoughts, I am saying of course, UK will still use oil, UK will still use natural gas, there is no question about that. Everybody will use them, but UK, if UK wants to have stronger muscles in the energy business, the issue here comes to my mind is electrification. Because UK can build renewables, nuclear power plants or geothermal and whatever, and as much as possible, electrify its energy system, but this should be done in a affordable way. If you don’t do in an affordable way, it is not good news.
Maybe I want to say one other thing. Since you the – politely criticised me not being enough political, I’m making a…
Bronwen Maddox
No, no, no.
Dr Fatih Birol
…political…
Bronwen Maddox
I…
Dr Fatih Birol
I cannot – this isn’t…
Bronwen Maddox
…was admiring…
Dr Fatih Birol
It is…
Bronwen Maddox
…your agility in these hyperpolitical times…
Dr Fatih Birol
Yeah.
Bronwen Maddox
…of pursuing what – your mission without that.
Dr Fatih Birol
Yeah. I should tell you one thing, maybe. So, living in France, following the – what’s happening in the world, in Europe, and elsewhere, what I’m afraid is the following. The international energy prices as a result of this is they are going to increase and they’re increasing, and this will affect the domestic prices in the petrol stations, in heating and so on. In fact, the governments in, let’s say Europe or UK, or whatever, they are – they don’t have much to do with this. It’s international thing, okay, it’s happening. However, there may be some extreme groups, political groups, who can abuse this as a failure of the existing political system in their countries. This politically enough? I think…
Bronwen Maddox
Hmmm.
Dr Fatih Birol
…this is – okay, I just want to give you – because I – we live – I live in France, I follow Germany, I follow UK. I see that there are some opportunistic thinking here and there. The – today the energy prices in the petrol station in the UK, or in Deut – in Germany or in France, big time, if the price go up, it is as a result of the international developments in the world. It is not the fault of Mr X, Mrs Y or whatever. They may not be the best government, I don’t know, I don’t want to comment on that, but I don’t want to give strong hands to the people to abuse this for their political agendas. This is what I want to say…
Bronwen Maddox
Interesting.
Dr Fatih Birol
…in a political context.
Bronwen Maddox
Because they should realise that the price is set globally.
Dr Fatih Birol
Exactly.
Bronwen Maddox
We could go on. We could go on and on. Terrific questions here. I’m so sorry I couldn’t get them all in. Terrific questions online. Thank you for sending them. Can you join me in just thanking Dr Birol [applause]?
