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The International Energy Agency (IEA) proposed 10 ideas for
cutting energy use—primarily gasoline and diesel fuel used by
motor vehicles—that it says can be implemented by its member
nations in the next four months to reduce global crude oil demand
by 2.7 million barrels per day (b/d).
This would represent about 6% of oil consumption in advanced
economies (45 million b/d) and about 3% of global consumption of
about 100 million b/d.
In its most recent forecast, published on 16 March, the IEA said
that up to 2.5 million b/d of Russian oil exports could be shut out
of the market starting in April, and it could build from there.
About 55% of Russia's oil exports go to Europe, and China takes
another 20%.
"If fully carried out in advanced economies, the measures [would
be] equivalent to the oil demand of all the cars in China," said
the IEA in a statement on 18 March when the plan was released.
"This would significantly reduce potential strains at a time when a
large amount of Russian supplies may no longer reach the market and
the peak demand season of July and August is approaching."
The "10-Point Plan to Cut Oil Use"
is the latest set of policy ideas to emerge in response to Russia's
invasion of Ukraine and the subsequent actions by many nations and
oil companies to ban the importation of Russian oil and gas. IEA
members have already committed to released nearly 63 million
barrels of oil from strategic reserves.
In Europe, EU member states agreed to eliminate all dependency
on Russian imports of oil, natural gas, and coal under the 11 March
Versailles declaration. Russia supplies
40% of EU gas consumption, 27% of oil, and 46% of coal. The EU's
executive on 8 March proposed a group of measures, entitled
REPowerEU, to reduce consumption of natural gas by two-thirds this
year, and in mid-May it will propose added measures to phase out
Russian oil and coal for a tentative deadline in 2027.
10-Point Plan
The 10 points are:
Reduce speed limits on highways by at least 10 km/hour (290,000
b/d reduction)
Work from home up to three days a week where possible (170,000
b/d reduction)
Car-free Sundays in cities (380,000 b/d reduction)
Make the use of public transportation cheaper, and invest in
infrastructure to encourage walking and cycling (330,000 b/d
reduction)
Alternate private car access to roads in large cities (210,000
b/d reduction)
Increase car sharing and adopt practices to reduce fuel use
(470,000 b/d reduction)
Promote efficient driving for freight trucks and delivery of
goods (320,000 b/d reduction)
Use high-speed and night trains instead of planes where
possible (40,000 b/d reduction)
Avoid business class and other premium air travel where
alternative options exist (260,000 b/d reduction)
Reinforce adoption of electric vehicles (EV) and more efficient
vehicles (100,000 b/d reduction)
The measures in the plan "have already been tested and proven"
in multiple countries and by corporations, said IEA Executive
Director Fatih Birol in announcing the program. "Governments have
all the necessary tools at their disposal to put oil demand into
decline in the coming years," he said.
In addition, Birol urged that the actions taken by various
nations become permanent because they will reduce GHG emissions and
air pollution as well.
Using a model developed by the Carnegie Endowment for
International Peace, one barrel of oil results in emissions of
475-770 kg of CO2-equivalent, depending on the type of oil and the
complexity of processing it into fuels. Using that estimate, a
reduction of 2.7 million b/d of oil would reduce annual global
CO2-e emissions by about 1.28-2.08 billion metric tons (mt)/year.
According to IEA, global CO2-e emissions from fossil fuels in 2021
were about 36.4 billion mt, so the reduced use of oil could cut
emissions by up to 5% in that category.
If the short-term demand measures are combined over the next two
or three years with added requirements for EV purchases, higher
fuel economy standards, and acceleration of heat pumps
installations in homes and offices, Birol said the impact would
sustain the drive towards a net-zero world by 2050.
Consumer behavior
Birol acknowledged that most of the short-term measures would
require changes in consumer behavior, often supported by or
mandated through government actions.
That is both its strength and weakness, said others.
"IEA's proposals are sound and well thought through," said Atul
Arya, chief energy strategist for S&P Global Commodity
Insights. "However, many of the proposed policies, such as car-free
Sundays in cities and making public transport cheaper, will require
policy changes that are politically difficult and therefore time
consuming to implement."
Ramping up sales of EVs is limited by supply-chain constraints
in manufacturing, he pointed out.
In fact, Arya said, the greatest driver of consumer behavior is
the problem that is driving IEA's plan: the cost of fuel. "The
immediate impact of these measures in the next 90 days is likely to
be minimal. In the short run, high oil price will be the biggest
deterrent to demand," he said.
High prices are a "point of pain" for drivers, said Claudia
Adriazola-Steil, director, Health and Road Safety Program, World
Resources Institute, in an interview with Net-Zero Business
Daily. "Because oil prices are skyrocketing, … we can get them
[drivers] back to more sustainable transportation," she said.
IEA's proposal that speed limits be lowered is an example of an
idea that has direct fuel efficiency benefits, but also improves
safety for cyclists and walkers, which is another part of the
10-point plan, Adriazola-Steil said. Paris reduced speed limits
this year, and she said that surveys indicate a million more people
have starting cycling. "Getting people back to more sustainable
transportation … is a gift," she said.
Investing in mass transit is another solution, Adriazola-Steil
said, especially as a bounceback for transit systems that lost
70-80% of ridership during COVID-19. She applauded New Zealand, an
IEA member country, for reducing fares on mass transit as a
low-cost alternative to driving. "Better quality, more affordable,
safer forms of transportation," she said. "I think this [IEA plan]
can work."
Market conditions and political backlash
S&P Global Commodity Insights estimates that without the
market disruption, global oil demand would have increased by about
1.5 million b/d in 2021, according to Kurt Barrow, ENR's oil
markets, refining and LPG/NGLs lead.
How much high prices already are influencing demand is difficult
to assess, he said, and so is predicting how new measures will
change behavior. "The modeling of this is quite complex as market
response is being clouded by emerging market governments'
reluctance to let market prices flow through to the consumer prices
due to serious concerns with inflation and civil unrest," he told
Net-Zero Business Daily by email.
With economic stimulus packages for COVID-19 recovery still
operating in some OECD markets, households have additional spending
capability as well, Barrow said. "Bottom line, some of the typical
price/demand elasticity responses will be blunted this year, but we
do expect demand to be impacted by higher oil price this year," he
said.
When it comes to high prices, Birol noted that economic justice
concerns should be factored in to how policies are developed by
each nation. As an example, he said value-added taxes often
represent a large portion of energy prices for consumers, so a
temporary reduction in taxes or direct payments to consumers can
help the poorest members of society.
In the EU, a newly proposed carbon market for vehicle
and heating fuel suppliers is intended to encourage the uptake
of EVs and lower-carbon heating systems. The policy was proposed
within July's Fit for 55 carbon neutrality measures. At a meeting
on 17 March, Sweden, Denmark, Germany, the Netherlands, Finland,
and Austria supported the new carbon market, while Poland and
Hungary opposed it on the grounds it would raise costs for
consumers.
In France, environmental taxes on diesel are a contentious
issue. Protesters brought parts of the country to a standstill
during the 2018 "Yellow Vest" movement in response to such a tax.
This led to the tax's cancellation.
Sensitivity to the price of gasoline and diesel is high in the
US, too. Democrats and Republicans in Congress have raised the idea
in recent weeks of suspending the federal tax on gasoline and
diesel, and several states already have implemented "tax holidays"
on their fees.
The US Senate has called in oil executives for a hearing on 6
April about whether gasoline prices have increased more than is
justified by the surge in oil prices.
"Over the past few weeks, as war in Ukraine began, the price of
a barrel of oil rose precipitously. That immediately translated to
oil and gas companies raising the price for Americans at the pump,"
said Sen. Chuck Schumer, Democrat-New York, on 17 March. "But
something is happening that Americans shouldn't overlook. Over the
past few days, oil prices have actually been decreasing, but the
price of gas at the pump has not."
West Texas Intermediate (WTI), the benchmark US crude, closed
above $123/bbl on 7 March. At close of trading on 17 March, WTI was
trading at about $103/bbl, or a drop of nearly 20% from its high.
During that same time period, average retail gasoline in the US
fell from about $4.33/gal to $4.30/gal, or less than 1%, according
to data from AAA cited by Schumer.
Posted 18 March 2022 by Cristina Brooks, Senior Journalist, Climate and Sustainability and
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