COP27 fails to turn off the oil tap as global production hits all-time high

The latest global climate summit has failed to even mention the reduction of fossil fuel usage, a key demand from India, in the final agreement text at Egypt

The just concluded COP27 Summit in Sharm El Shaikh, Egypt has been unable to finally agree on the need to phase down fossil fuels, a key proposal pushed by India. Instead, it called for accelerated efforts to phase out unabated coal power and inefficient fossil fuel subsidies, same as the 2021 summit in Glasgow.

However, global figures from the International Energy Agency (IEA) show oil production continues to reach all time highs.

According to the IEA's latest monthly Oil Market Report, global production will hit 99.9 million barrels per day in 2022. This constitutes an all time high level of oil production despite the subdued global demand throughout the year. "China’s persistently weak economy, Europe’s energy crisis, burgeoning product cracks and the strong US dollar are all weighing heavily on consumption," the IEA pointed out.

Going forward, even as oil demand falters in the short term, supplies are set to rise to a record, pushed up to 100.7 million barrels per day in 2023.

Oil prices skyrocketed after Russia’s invasion of Ukraine in February, and had begun to soften by September over fears of recession in Europe and slowdown in China. However, the Organization of the Petroleum Exporting Countries (Opec) and its partners, such as Russia, announced a cut in Opec+ crude oil output by 2 million barrels per day (bpd) from October.

Representing the biggest cut in production since the pandemic in 2020, this is expected to keep global energy volatility high in 2023. As a result, more nations are expected to scramble to source oil while non-OPEC nations like US, Canada and Brazil look set to pump at their highest ever annual levels under pressure to shield consumers and businesses from rising oil inflation.

Differentiated reduction

New Delhi has repeatedly called out the selective singling out of sources of emissions for reductions, by labelling them as less or more harmful. India received flak from the global press for holding up the pact in Glasgow which was the first climate deal to explicitly commit to reducing the use of coal. India and China had insisted on incorporating a gradual 'phase down' of coal, rather than a blanket 'phase out'.

The latest outcome is expected to leave Indian policymakers irritated, since it effectively restricts some nations from tapping their own locally available energy source, while letting others use it with abandon. India is the second-largest producer of coal globally, but is forced to rely on imports for up to 85 percent of its oil and gas needs.

Citing the Sixth Assessment Report of the Intergovernmental Panel on Climate Change, Indian negotiators had told the Egyptian COP27 presidency that meeting the long term goal of the Paris Agreement "requires phase down of all fossil fuels".

No carbon emission

The latest summit marked a major departure from earlier in its silent treatment to the issue of overall carbon emissions. Hitherto, the problem of carbon emissions had been described as the singular most pressing reason behind the summit, while nations had debated over statistical modelling showing which nation released the most carbon into the air.

However, wracked by a series of devastating climate events such as the floods in Pakistan which submerged a third of the country, issues of climate justice such as the need for a loss and damage fund took centre stage.

The summit also couldn't take forward discussions on other significant contentious issues on the agenda, including how countries report their emissions and rules for global carbon markets.

Media reports from COP27 have pointed the finger at the usual culprits comprising major oil producing nations. Reports said Saudi Arabia opposed any move to even add a reference to fossil fuels in the final text of the agreement.  

Instead, it called separate meetings of West Asian and North African nations to announce plans of planting 50 billion trees around the region. It has also pushed for expanding wind and solar power, and enhancing carbon capture and storage technologies.

It was also suggested the Egyptian Presidency held back the COP agenda on carbon emission as due to Egypt's regional alliances.

Next year’s meet will take place in Dubai, hosted by the United Arab Emirates, another of the world’s biggest oil exporters.

Deluge continues

• Global oil production near record high of 99.9 million bpd in 2022
• Demand growing slowly due to economic downturn globally
• Supplies to still reach 100.7 million bpd in 2023
• OPEC+ announced production cut of 2 million bpd from October