G7 urges Opec to boost output to cool oil market
G7 energy ministers have called on the Opec group of oil-producing countries to pump more oil as Russia’s war in Ukraine pushes crude prices to their highest levels in a decade.
The call was contained in the final communique of a meeting of G7 energy and environment ministers in Germany, which holds the rotating presidency of the group of advanced industrial economies.
The ministers noted that the war had triggered an increase in prices for oil, gas and coal, stoking a surge in inflation that was putting huge strain on low-income households as well as businesses and industry.
“We call on oil and gas-producing countries to act in a responsible manner and to respond to tightening international markets, noting that Opec has a key role to play,” the ministers said.
They also said it was a matter of “special urgency” for the EU to decrease its dependency on Russian natural gas, and stressed the important role increased supplies of liquefied natural gas (LNG) could play “in order to mitigate potential supply disruptions of pipeline gas, especially to European markets”.
Earlier this month, G7 leaders committed their countries to phasing out their dependency on Russian energy, including by banning imports of Russian oil. The EU is also discussing the option of an embargo on Russian crude, though Hungary is opposed.
Yet despite the G7’s appeal to Opec, it is unclear whether the group will respond. Saudi Arabia has been resisting western pressure to accelerate production increases to help bring down prices, insisting there is no lack of supply.
Oil prices have almost doubled in the past year to trade close to $120 a barrel, the highest level since 2014, leading to criticism of Gulf states such as Saudi Arabia with spare production capacity.
The Opec+ group, which includes Russia, slashed production as part of output agreements made during the Covid-19 pandemic, before restoring it gradually at a rate of 400,000 barrels a day each month.
The kingdom is also not backfilling quotas for members that have struggled to restore production, leaving many to argue the group has left the market short of supplies.
Saudi Arabia signalled this month that it would stand by Russia as a member of Opec+ despite tightening western sanctions on Moscow.
At their meeting in Berlin, the G7 ministers also pledged for the first time to decarbonise their electricity sectors by 2035 and eventually phase out coal power generation, part of efforts to reduce greenhouse gas emissions.
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That represents a significant move by G7 member states Italy, Japan and Canada, which have been slower than members such as the UK and Germany when it comes to pledging to ditch coal from power generation. The US and Germany already had a 2035 target for zero carbon electricity and the UK’s target is earlier.
But the ministers stopped short of promising to end coal power by 2030, a proposal that had been pushed by Berlin. The pledge was removed because of opposition from the US and Japan, according to people familiar with the discussions.
The communique commits the G7 to a goal of “achieving predominantly decarbonised electricity sectors by 2035” and to “concrete and timely steps towards the goal of an eventual phaseout of domestic unabated coal power generation”.
Robert Habeck, the German economy minister, said both commitments taken together meant that “by the 2030s, the phaseout of coal should be well-advanced in all G7 countries — even though we didn’t list which particular power stations, from Japan to the US and from Germany to the UK, will be closed down”.
He said some countries might take longer than others to ditch coal because their renewables capacity was still relatively low or they didn’t have nuclear power to fall back on. But “the crucial issue is, did we nevertheless succeed in moving on from the status quo? Of course it’s always good to do more, but with this conference we definitely took a step forward.”
Francesco La Camera, head of the International Renewable Energy Agency, said the outcome was positive for the energy transition. “There is the phaseout of coal, and everyone is on board with this,” he said. “There is a clear sense of urgency.”
Additional reporting by David Sheppard in London