The View | Renewable energy investments must not flag even when oil prices fall
- Price fluctuations in a key resource like oil worry not just developing economies dependent on imported fossil fuels, but also developed economies concerned about the impact on growth
- They also affect the investments needed to fund a transition to renewable energy. It is up to regulators to maintain control even when oil prices fall to ensure consistent commitment
Energy prices have been the subject of discussions lately, as the world is ensnared by an upward trajectory in oil prices. Brent crude prices increased nearly US$20 in the three months from June to September, averaging US$94. With the recent conflict in the Middle East, prices reached as high as US$96.
This surge carries a far-reaching impact on global economies, most notably in terms of inflation, exerting sustained upward pressure on prices across various sectors. The culprits behind the climb in oil prices are none other than the giants of the energy world: primarily Saudi Arabia and Russia.
Their shrewd manipulation of oil supply has nearly breached the psychologically significant one-hundred-dollar mark, sending ripples of unease throughout the global economic landscape.
The decision by Opec and its allies to curtail supply was a strategic move aimed at bolstering a market battered by lacklustre demand. This precautionary measure was intended to arrest further downward spirals and stabilise the volatile oil market.
Adding to the mix, Saudi Arabia went the extra mile by promising a unilateral production cut of one million barrels per day from July to restore equilibrium to its budget. The Opec alliance has signalled its commitment to this strategy until at least the end of 2024, indicating that rising oil prices are here to stay for the foreseeable future.
On the other hand, Russia is increasingly concerned about domestic petrol and diesel shortages, leading to a temporary ban on exports, with only intergovernmental agreements spared. According to the Kremlin, the rationale behind this move is to address soaring energy prices within Russian borders.