The immediate reaction to OPEC+'s unexpected decision to cut oil and gas production was the biggest rise in oil prices in the last year. However, this will have a longer-term impact on the global campaign to end the use of fossil fuels.
Source. Bloomberg
Last year, the rapid rise in energy prices and Russia's invasion of Ukraine became accelerators for the abandonment of dirty fuels. However, due to the sudden energy crisis, even the most climate-progressive countries have turned to coal and gas as a reserve.
Experts note that last year's experience of acute shortages of oil and gas has led many countries that are used to relying heavily on traditional fuels to increase their investments in alternative energy generation.
The publication notes that the issue of energy security is no longer one of ecology, but of energy security, as the authorities of many countries are tired of being dependent on other states that can manipulate the market.
"The higher the cost of traditional fuels, the greater the incentive to continue the transition. This, by the way, is another reason why OPEC does not want to keep prices at $100 per barrel," says Ole Slot Hansen, Head of Commodity Strategy at Saxo Bank.
This example is particularly illustrative in the context of the ongoing energy confrontation with Russia, which has drastically reduced its gas supplies to the EU in 2023.
This has prompted local authorities to look at alternative methods of power generation and increase investments in green and nuclear energy. Moreover, analysts have observed an inverse relationship between the price of oil and rare earth metals needed to produce green energy elements. For example, while oil prices are rising, the cost of lithium, which is needed to produce powerful batteries, is falling, which is pushing the production of electric cars.
Following OPEC's decision, oil prices rose by around 10%. At the same time, lithium prices have fallen by 3%, and since the beginning of the year – by 57%.
As a result, many electric car manufacturers have cut prices for their products. Similar dynamics are observed in other commodities needed for green technologies: polysilicon used in solar panels has fallen by more than 30% since last year, and steel used for wind turbines has fallen by 40% in Europe and 20% in the United States.
Background. As reported, Ukraine is looking for startups to take part in the world's largest eco-exhibition.