Yahoo Finance Net zero rush risks sparking fresh surge in energy prices, warns BP boss
Cutting fossil fuel supplies too quickly risks a fresh surge in energy prices, the boss of BP has warned.
Bernard Looney, chief executive, said supply and demand needed to fall at the same pace to lessen the risk of “economic volatility”.
He called for a “cautious” approach to avoid a repeat of the surge of oil and gas prices over the past year in the wake of Russia’s invasion of Ukraine.
BP is investing heavily in renewable energy as it starts to diversify from oil and gas and cut its carbon emissions.
However, this month it dialled back on targets to cut oil and gas production by 40pc by 2030, saying it will now only cut by 25pc.
Speaking at the International Energy Week conference in London on Tuesday, Mr Looney said the shift to net zero emissions was a “massive opportunity”.
He added: “I'm an optimist. That does not, however, mean that we don't need to be cautious.
“As the events of last year demonstrated, the sudden loss of even a small part of the world's oil and gas can have severe economic and social costs.
“Reducing supply without also reducing demand inevitably leads to price spikes – price spikes, leads economic volatility.
“And there's a risk that volatility will undermine popular support for the transition, an outcome which nobody wants.
“We avoid that outcome by investing in today's energy system, as well as investing in the transition. And, not or.
“We have a way to go, but there are a growing number of reasons, I think for why we tend and should be optimistic.”
Surging oil and gas prices helped BP hit record profits of $27.6bn (£22.8bn) in 2022.
The company plans to invest up to $8bn per year in oil and gas and $8bn per year in cleaner energy, up to 2030.
Separately on Tuesday, the International Energy Agency (IEA) warned that China’s re-opening could spark a fresh surge in gas prices.
Gas prices have fallen back to pre-war levels in recent weeks thanks to milder weather, helping to ease the cost-of-living crisis.
However, the IEA said China’s demand for liquefied natural gas (LNG) could grow by as much as 35pc this year as it emerges from lockdowns implemented under its strict zero-Covid policy.
It added: “This would spark fierce competition in international markets and could see prices return to the unsustainable levels seen last summer, representing a concern for European buyers in particular.”
The Bank of England’s most hawkish policy maker has warned that falling energy prices could still fuel inflation as consumers have more money to spend on other things.
Catherine Mann, a member of the monetary policy committee which sets interest rates, said that core inflation could keep rising even as the headline consumer prices index falls, Bloomberg reported.
Speaking at an event hosted by the European Investment Bank in Luxembourg, she said: “What [people] aren’t going to spend on energy, they’re going to spend on something else.”
She added: “That translates something that I do not control, which is external energy prices, into something that looks a whole lot more like what I’m supposed to control, which is domestically generated inflation.”
