The head of the International Energy Agency said on Tuesday the G7 proposal to impose a price cap on Russian oil should include refined products as well.
The Group of Seven rich nations are considering imposing a price cap on Russian oil in an effort to keep oil flowing and curb inflation, while still limiting revenue to Moscow for the war on Ukraine that it calls a “special military operation”.
“My hope is that the proposal, which is important to minimise the effect on the economies around the world, gets buy-in from several countries,” IEA Executive Director Fatih Birol told Reuters in an interview on the sidelines of the Sydney Energy Forum.
“And if it is pursued, it is not only focused on crude oil, as refined products are also an important challenge for the economies and will be more of a challenge in the next months to come,” he said.
Prices of refined products, such as gasoline and diesel, have soared even more than crude oil in the wake of the loss of Russian supply, because of a global refinery capacity crunch following the closure of several plants around the world.
The G7 idea is to tie financial services, insurance and the shipping of oil cargoes to a price ceiling. A shipper or an importer could only get these services if they committed to a set maximum price for Russian oil.
Birol said he did not know what level the price cap would be set at.
The IEA chief was in Sydney to co-host a meeting of Indo-Pacific nations with the Australian government discussing supply chains, the transition to clean energy and energy security. Countries attending included the United States, India, Japan and Indonesia.
The Sydney Energy Forum was focused on what needs to be done to ease global dependence on China for solar technology and countries like the Democratic Republic of Congo and Russia for critical minerals essential for clean energy technologies such as batteries, electric vehicles and wind turbines.
Birol said the IEA was working on a plan to coordinate critical mineral supplies among its member and associate member countries in case of a supply disruption, similar to the emergency petroleum stockpiles that have been used recently to beef up global oil supply.
“Critical minerals security will be an important issue for energy security in the future,” Birol said.
“It is the reason that IEA ministers asked the IEA to consider building a safety network and coordination among its members and associate members in terms of a major disruption in the availability of critical minerals.”
He did not give a timeline for finalising plans for the “safety network” and said it was too early to say what it would entail.
The IEA sees opportunities for Australia, India, Indonesia and the United States to build solar technology manufacturing capacity to ease the world’s dependence on China, which the IEA says will have a 95% share of the market by 2025, based on current construction plans.
“We cannot rely on one single country,” Birol said, adding that China had a competitive advantage in manufacturing thanks to lower electricity prices.
To overcome that competitive edge, he said countries like Australia and India would have to offer incentives to companies to set up solar technology manufacturing plants.
“I see a big opportunity in India,” he said.