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market | IST

Economic rebound seeing pressure on coal demand: Daniel Yergin of IHS Markit

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Crude prices remain in focus with brent crude rising to nearly seven year highs. It is holding above $85 a barrel. The increase in prices is fuelled by weak supply of natural gas and coal across the world, even as the onset of winter sees demand for heating rise. WTI NYMEX is over a percentage higher at $83 a barrel. CNBC-TV18 was in conversation with Daniel Yergin Vice Chairman at IHS Markit and Author of ‘The New Map: Energy, Climate, and the Clash of Nations’ from CeraWeek Summit.

Crude prices remain in focus with Brent crude rising to near-seven-year highs. It is holding above $85 a barrel. The increase in prices is fuelled by weak supply of natural gas and coal across the world, even as the onset of winter is seeing demand for heating rise. WTI NYMEX is over a percentage higher at $83 a barrel.
CNBC-TV18 was in conversation with Daniel Yergin, Vice Chairman at IHS Markit and Author of ‘The New Map: Energy, Climate, and the Clash of Nations’, from the CeraWeek Summit.
On crude oil prices, Yergin said, “I think, China energy crunch, rising natural gas prices, coal shortages, almost everything seems to be impacting fuel prices. Add to that the wind not blowing in the North Sea in Europe — England and several other countries get a substantial amount of their electricity from wind. So, if the wind goes to almost nothing, then you either have more coal or natural gas, and of course, some countries like Germany have shut down their nuclear-powered electricity. So, all of these things came together. But I think the starting point was the economic rebound — coming out of COVID and the way the Chinese economy really roared to life — that started to pull, and is now affecting the whole world. Of course, India too is affected by this.”
On energy transition, Yergin said, “I think, there has been a lot of conversation about energy transition, and of course, the important Glasgow conference is coming up. But I think, what we are seeing now really demands a rethink, and a question needs to be asked — are sufficient investments going into conventional resources? Has there been a mistake about the timing? How fast are things happening? Or is what we are seeing now a kind of precursor to a series of shocks? Clearly, investment has been inadequate in conventional resources if you are going to have a growing world economy.”
He added, “I think, the risk here is not climate, but weather, cold winter, and we're already seeing that in China. That will put even more pressure on supplies. So, the best solution here is a mild winter. The other thing, of course, is you get slower economic growth, and that is what you are seeing in China in terms of their current growth numbers. We are here still in October, and the next couple of months would be very challenging; around the world coal stocks are low, including in India, and China. They are already rationing electricity. They are telling factories not to operate, elevators should go to only certain floors, they are doing a whole host of different things. It is rationing electricity. When you see natural gas prices, LNG prices landing in Europe, at five times the normal price. I think, you can call this an energy crisis.”
On energy crisis, Yergin said, “It is not a reason to panic, but this is a very serious situation. There's been a kind of assumption, in many parts of the world, that energy will be available when you need it. But coming out of COVID, if you are going to have growing economies , you are going to need this (energy) and you are going to need to step up investment to deal with it. But as I said, the next couple of months will really be a testing period for the global energy system and the global economy.”
On India’s role in the global energy system, Yergin said, “India’s voice every year becomes more important in the global energy system. I think, we are going to hear that this year at our conference. The producers look to India as a growth market, as they rightly should, as the Indian economy grows. And so I think, the voice of India needs to be very clear about moving towards as much as possible, to moderate what is happening in energy prices. Because as a major consuming nation, it really hits India.
“On the other side, of course, it is moving ahead with a diversified package, whether it is upstream, natural gas network, or hydrogen. The Prime Minister talked about this in his Independence Day speech. He said India is moving ahead on all these fronts, and what India brings, among other things, to this whole energy question is its innovative abilities, technical capacity, and harnessing that to meet the energy needs of today and tomorrow, and of the longer-term future.”
For full interview, watch accompanying video...