There was a fresh warning from the oil industry yesterday that cutting fossil-fuel supplies too quickly risks a new surge in energy prices.
BP chief executive Bernard Looney said that supply and demand needed to fall at the same pace to lessen the risk of economic volatility.
The Telegraph says he called for a cautious approach to avoid a repeat of the rapid upward movement in oil and gas prices in the wake of Russia’s invasion of Ukraine.
BP is investing heavily in renewable energy as it starts to diversify from oil and gas and cut its carbon emissions.
However, last month it dialled back on targets to reduce oil and gas production by 40% by 2030, saying it will now only cut by 25%.
Speaking at the International Energy Week conference in London on Tuesday, Mr Looney said the shift to net-zero emissions was a “massive opportunity”.
Caution
He added: “I'm an optimist. That does not, however, mean that we don't need to be cautious.
“As the events of last year demonstrated, the sudden loss of even a small part of the world's oil and gas can have severe economic and social costs.
“Reducing supply without also reducing demand inevitably leads to price spikes – price spikes lead economic volatility.
“And there's a risk that volatility will undermine popular support for the (energy) transition - an outcome which nobody wants.
“We avoid that outcome by investing in today's energy system, as well as investing in the transition. And, not or.”
Also yesterday, the International Energy Agency (IEA) warned that China’s reopening could spark a fresh surge in gas prices. They have fallen back to pre-war levels in recent weeks thanks to milder weather, helping to ease the cost-of-living crisis.
Gas demand
However, the IEA said China’s demand for liquefied natural gas could grow by as much as 35% this year as it emerges from lockdowns implemented under its strict zero-Covid policy.
It added: “This would spark fierce competition in international markets and could see prices return to the unsustainable levels seen last summer - representing a concern for European buyers in particular.”
Meanwhile, the Bank of England’s most hawkish policy maker has warned that falling energy prices could still fuel inflation as consumers have more money to spend on other things.
Catherine Mann, a member of the monetary policy committee which sets interest rates, said that core inflation could keep rising even as the headline consumer prices index falls.