Countries and companies planning to expand their fossil fuel production are taking “very unhealthy and unwise economic risks” as their investments may not be profitable, the world’s foremost energy adviser has warned.
Fatih Birol, the executive director of the International Energy Agency (IEA), predicted this week that fossil fuels would peak this decade, a historic turning point for the climate. But despite the likelihood of demand declining, and the threat of climate chaos, many countries and private sector companies are considering new capacity.
Birol said: “New large-scale fossil fuel projects not only carry major climate risks, but also business and financial risks for the companies and their investors.
“When I talk with the oil companies, both international and national oil companies, some of them are saying that we have been underinvesting in oil and gas. But companies and investors should be very careful about this claim, bearing in mind the demand trajectories we are seeing. It could lead them into taking very unhealthy, unwise economic and climate risks.”
But even with governments’ current climate policies, which are inadequate and need to be toughened, the amount of oil and gas needed globally will decline, Birol noted.
“If you start a project today, wherever you are, the first oil or gas will come to markets in five years, and will come at a time when you will see global oil and gas trends declining,” he told the Guardian in an interview. “Therefore, one should be very careful about not only the climate risk, but also the business risk on large-scale oil and gas projects.”
Several countries and companies planning expansions have cited findings from the IEA that oil and gas will still be needed in the future, even when the world reaches net zero greenhouse gas emissions, as justification for their plans. Birol warned that they were not taking on board the IEA’s full advice: “We will definitely need oil and gas in years and years to come, but the issue is the amount of oil and gas we will need globally will be less and less.”
He said: “They are misjudging the market trends – they believe what they want to believe. And they also misjudge the mood of the people in the street as far as climate change is concerned, and their responsibility.”
Birol applauded the proposed commitment to triple global renewable energy capacity, likely to be a centrepiece of Cop28, which will take place from late November in Dubai. But he said this commitment was insufficient and that the rapid decline of fossil fuels was also needed to keep the world within 1.5C.
“The increase of renewables is good, but in the absence of a decline in fossil fuels, the impact on temperature trajectories will be minimal or nothing,” he said. “There should be a discussion [of the phase-out of fossil fuels at Cop28]. And I hope that discussion will give a signal to the markets that fossil fuel consumption will fall.”
Warnings that the price of renewable energy could rise were overdone, Birol indicated. “There may be some zigzags [on the price], but the overall trend is they are competitive [with fossil fuels] and will be even more competitive in future,” he said. “Solar is very competitive, and offshore wind is making big steps – soon we will see it competitive as well.”
Although he has forecast that fossil fuel use will peak for the first time this decade, Birol said much more needed to be done by governments to ensure that its use declined far more steeply afterwards. “The most important issue is not the peak, but the decline of fossil fuels after the peak, that is the nerve centre of the problem.”
Current policies will lead to global heating of 2.4C and must be toughened as a matter of urgency, he said.
TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.
The S&P/TSX composite index was up 171.41 points at 23,298.39.
In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.
The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.
The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.
The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.
This report by The Canadian Press was first published Aug. 29, 2024.
The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.
The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.
Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.
The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.
Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.
Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.
Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.
Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.
The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.
