A Conversation With International Energy Agency Executive Director Fatih Birol

Dr. Fatih Birol has served as Executive Director of the International Energy Agency (IEA) since 2015. He has overseen a comprehensive modernization program making the agency the global hub for clean energy transitions and broadening its energy security mandate.

In this discussion, Fatih Birol shares his perspectives on the current state of global energy markets, new and emerging risks to energy security, the geopolitics of the energy transition, the implications for the global economy, and prospects for limiting global warming.

FROMAN: Good morning, everybody. Welcome to U.N. week. New York traffic, lots of activity, but I hope all of you will take full advantage of our CFR meal plan this week, breakfast, lunch, and dinner around various events. Make yourself at home here. I’m Mike Froman. I’m president of the Council. And I’m really personally delighted to welcome you to this event with the International Energy Agency Executive Director Fatih Birol, who’s an old friend and colleague. We worked together in the past.

There’s really no issue more central to geopolitics than energy security. And it goes back all the way to 1973-1974, the oil embargo, when we saw the power of energy as a geopolitical tool. And it was in the aftermath of that crisis that the IEA was set up. And since then, it has served a very vital function of being the center of truth and data on what’s really going on with energy production and usage around the world. Again, today geopolitics and energy security are inextricably linked with Russia threatening the use of energy as a tool, and the dependence of Europe—previous dependence of Europe on Russia being a major issue around the Ukraine conflict. And the IEA has played a central role in helping countries navigate their way through this.

Fatih has been at the IEA since 1995, starting as a junior analyst. Rose all the way to be the senior economist, the chief economist, and then became the director in 2015. And he has helped transform the IEA to build on its strengths in the fossil fuel sector, but to also look at renewable energy and clean energy technologies as well. So it now serves as a major resource for the member states and for the rest of the world on the whole range of energy security issues, from fossil fuels all the way through to renewables.

We’re delighted to have him here. And we’re delighted that Carolyn Kissane, associate dean and clinical professor at NYU’s Center for Global Affairs, has agreed to moderate. And let me invite the two of you up. (Applause.)

KISSANE: All right. Well, hello, everyone. It is such a pleasure to be here this morning with all of you. And it is a distinct honor to be here with Dr. Fatih Birol, who, as Mike Froman just shared with us, is the executive director of the International Energy Agency. I have to say, Mike, you did some of the work that I had planned. So you really sort of set up this conversation for giving the background of the really critical work of the IEA—the IEA at fifty, right? Fifty years.

BIROL: Yes.

KISSANE: And actually, we’re going to start today with—we’re going to start with oil, right?

So, going back to the—to the sort of the founding mandate of the International Energy Agency, it was very much addressing energy security, oil security at a really critical moment, with the Arab oil embargo. Today, we have conflict on multiple fronts. We have conflict in the Middle East which is very tenuous in terms of where it might go. We have Russia-Ukraine. We have regional conflict across the continent of Africa. And yet, the price of oil is actually not going up. In fact, it’s staying in the mid-to-low seventies. Following Russia’s invasion of Ukraine, it was—you know, it hit—went over $100 a barrel. But today, even with multiple oil security questions and risks, oil is really not moving. The market’s not sort of responding to the multiple risks. So do you want to sort of share with us your thoughts about the oil landscape today?

BIROL: With pleasure. But, once again, thank you very much, Mike, for inviting me. And, once again, congratulations to CFR for appointing you as leading this wonderful institution. And thank you very much for chairing this meeting.

As far as oil markets are concerned, we as—oil markets are as important as 1974. We follow very closely. And everything developing today in the oil markets are perfectly in line with what we said some fifteen months ago. So the biggest question the oil markets is—there are two things, basically: How much the demand will increase, and how much the production will increase, to understand what will happen in the next year. And this is very important, but fifteen months ago we said in the year 2024, in this year, oil demand will be weak, less than one million barrels per day. And at that time many people noted this number, but some people said IEA is saying very weak oil demand because of the climate policies and so on, which is wrong—completely wrong.

Dear colleagues, we have to understand what is happening in China in oil demand cuts. Look, the September last year, looking at all the numbers, my colleagues said—IEA is a big data mine. So when I became the—when, as Mike said, in 2015 I became the head of IEA, I told my colleagues, one golden rule. Data always wins. So when I look at this data, I thought it is now time to announce the world—it was in an op-ed in Financial Times, mid-September last year, oil demand will peak before 2030. And this has nothing to do with climate change, just China—basically, China.

Because in the last ten years, more than 60 percent of the global oil demand growth came from China only. So more than 60 percent in one country. And at that time, China’s economy increased on average more than 6 percent per year. And now everybody knows and everybody agrees that Chinese economy is slowing down to about 4 percent per year, number one. Number two, today every second car—in fact, more than every second car—60 percent of all new cars sales in China are electric cars. And this is not driven by climate change. This is driven by industrial policy and oil security reasons.

So as a result of that, we said, again coming back to 2024, oil demand will be less than one million barrels per day this year. And many of the others placed it to be double that high. And people thought it was because of climate policies. No. It was just the numbers with demand. And we are coming to see the global oil demand peak sometime soon. But this doesn’t mean that we will not need oil anymore. It is something else. Supply. There is American quartet, we call them, the four countries in Americas bringing a lot of new production—U.S., Canada, Brazil, and Guyana. I see John Hess, the architect of Guyana, here.

So the production growth coming from these four countries only are higher than the global oil demand growth. So as a result, weaker demand, strong production growth from non-OPEC countries in the American quarter means that even in a big political tension in the Middle East, as you mentioned, even a major producer such as Libya, 1.2 million barrels per day, is shut down. Oil crisis came. Fifteen dollars down from August—$70.

So this is the picture we are seeing. Weaker demand, more non-OPEC supply, and therefore a much more moderate the oil crisis. So I’m looking at the next years to come. I believe under normal conditions we will see oil demand still being on the slow side and the numbers we have seen in the past—2 million barrels per day, 1.5 (million barrels)—these are all per se or over. In general—there may be zigzags but in general this will not be the trend.

KISSANE: OK. Thank you for that.

So I’m going to just follow up. Prior to joining the IEA you were with OPEC. Now, OPEC numbers and OPEC forecasts looks a little bit different than that of the IEA and they anticipate higher demand. Of course, they’ve also been sort of holding back production.

How do you sort of—are they just sort of hoping against the realities?

BIROL: It’s up to, of course, my colleagues in OPEC to answer, but their number is—their expectation is still around 2 million barrels per day and ours is less than 1 million barrels per day.

There’s a big decalage, a big gap between those two numbers. It’s up to the market players to decide what is right, what is wrong. But as I said, there is only two or three months left this year to finish and the demand looks rather weak at the time.

KISSANE: So this is—in addition to UNGA Week this is also Climate Week in New York and we’re looking at—and we’re a little less than two months away from COP-29 in Baku, Azerbaijan.

But going back to COP-28 in Abu Dhabi, there was the agreement to transition away from fossil fuels. How realistic is it? Now, you just gave a great sort of narrative picture of what’s happening in the oil market.

But how realistic is it to reduce dependence on also natural gas, which we’re seeing year on year increases; even coal, which we see year on year increases. How realistic is it to transition away from fossil fuels?

BIROL: So as far as the clear transition is concerned, again, looking at the numbers I am really optimistic. So, again, I look at the numbers rather than the political statements.

So if I can give you maybe three numbers. I’m sorry I talk about numbers but three numbers. This year of all the new power plants built in the world—there are lots of power plants around the world in Asia, Africa, Europe and so on—85 percent—85 percent—were renewables, 5 percent nuclear, and 10 percent coal and gas, and within the 85 percent the biggest share is solar.

Why? Because solar is cheap. Not because of climate change. Because solar is cheap and so people are building this. Ten years ago solar was a romantic story. It’s not romantic anymore. It is a real business because people choose because it is the cheapest. This is one picture that makes me hopeful.

The second one is in the electrification of the transportation sector. Four years ago of all the cars sold in the world one out of twenty-five was electric—one out of twenty-five four years ago—and this year it is more than one out of five cars sold in electric.

And now, in my view, most importantly, in China electric cars are cost competitive vis-à-vis the internal—the normal cars that we are seeing—the petrol cars. So this—in other words, the electrification of transportation sector is coming.

The third and the last number I want to give, and for me it is the most important number, at the IEA we look at all the energy investment—oil, gas, pipelines, electric cars, renewables, everything—and look at the budget of the energy world—how much money the budget of the energy sector globally.

Ten years ago the entire budget was about $2 trillion U.S. and 1 trillion (dollars) for fossil fuels, 1 trillion (dollars) for clean energy—2 trillion (dollars) ten years ago—and this year total investment, total budget of the energy sector is 3 trillion (dollars), fossil is still 1 trillion (dollars) and the clean energy went from 1 trillion (dollars) to $2 trillion U.S.

So there is a big increase in the clean energy investments and, again, these are not driven by climate concerns. These are driven by the economics, energy security, and industrial policy reasons.

Why I’m saying this is it, because I get a lot of questions. Around the world there are lots of elections, maybe too many. I don’t know—

KISSANE: Sixty-four. Sixty-four.

BIROL: Everywhere around the world. And would it change? Of course, it can slow down in some countries, accelerate in the others. But I believe the clean energy transition is irreversible because it’s the industrial policies, energy security, and the economics of it. So from that angle, I am optimistic about the energy transition.

It is not the case that there aren’t many bumps on the way, and I see that in many countries there are corners who are eager to celebrate every bump on the road to clean energy transition. That’s OK. But, in my view, the road is very clear and, again, based on not climate policies. Based on economics, industrial policies, and the energy security concerns.

KISSANE: Well, thank you for that.

So going back to China, I think one of the things that we are seeing both in Europe and here in the United States and most recently this morning are sort of policies to counter China with regards to trade.

There are hundred percent tariffs on electric vehicles from China, 25 percent on solar panels. Just this morning the United States has issued sort of bans on sort of parts, components, that go into cars. Again, this is in some ways to counter China’s rise but it’s also there are a lot of security implications.

Europe as well has a pretty strong industrial policy that is also meant to counter China. How do you sort of see that playing out? Is that a hindrance to the energy transition? Is that going to sort of slow it down with—

BIROL: This is also another very important issue.

So, first of all, I think everybody in the world who is a bit realistic—left, right, north, south—the next chapter of the manufacturing industry lies in the modern clean energy technologies. This is one thing, regardless of anything.

Second, China is now by far—by far—is the dominating country, first in terms of manufacturing solar PV. Solar, wind, electrolyzers, electric cars, batteries, China is by far number one.

Plus, in order to manufacture this you need some critical minerals. Leave aside the mining. In terms of processing and refining of these critical minerals China has a 75 (percent), 80 percent share globally. China is dominating the game.

Now, of course, other countries want to have also a good position in the next chapter of the manufacturing industry. In my view, the Inflation Reduction Act—I remember I was writing two years ago when I came here—again in Europe, when somebody asked me, what do you think about the IRA. I said it was the—one of the most important policy action as far as the climate change and the American manufacturing industry’s concern for the jobs.

In Europe we are—Europeans are also preparing a similar one in order to have a competitive position vis-à-vis China in the next chapter of the manufacturing industry.

Now, what is important here, some countries like U.S., and Europe, Japan, India, they are also putting some trade measures—trade policies, protection policies—in order to protect their domestic manufacturing. It’s a legitimate concern. But if those—if those trade barriers are not put in the right way, it may well slow down the clean energy transition. So therefore, in my view, we will see, starting from next year and so—we have a new administration in the—in the United States. There is a new European Commission. In India, Prime Minister Modi started his next term. In Japan, there’ll be a new government coming soon. I think we are going to see three important forces. There will be a tension in three important directions—energy policies, industry policies, and trade policies.

Trade will be now an integral part of the energy and industrial policies of the countries. It is the reason, if I may say, just next month we are coming with a major report, the role of trade in the clean energy manufacturing around the world in the countries we mentioned, but also studying some emerging countries where there may be some opportunities for them to have the manufacture—which part of the manufacturing—clean energy manufacturing industry they can play a role. So trade policies will be very important.

Therefore, CFR is very lucky to have Mike Froman here, one of the best trade specialists in the world.

KISSANE: And Varun here. And Varun.

BIROL: (Inaudible)—of course, (is lucky ?).

KISSANE: Thank you for that. So, you know, going back to the founding of the IEA, it was, you know, within the OECD framework. And the majority of—basically, the majority of members of the IEA are developed countries that, again, are sort of more on the road to making that energy transition. However, there are many developing countries that are associate members or that are not directly affiliated. How do you—how do you account for, you know, the deep energy poverty that exists—still exists around the world? You know, countries that are not in a position yet to transition away, but are very much in the adding to perspective of their, you know, ensuring a level of energy security and national security?

BIROL: So the IEA family, we call it, IEA membership, until 2015 was limited to the OECD members, which means U.S., Canada, European countries, Japan, Korea, Australia, and New Zealand. But when I became the head of the IEA 2015, we have started a new strategy, opening the doors to the emerging world. And we have—we have received several countries as either full members or associate members as part of the IEA family. Such as Mexico, such as India, such as China, Brazil, Indonesia, South Africa. Now, the share of the IEA family in the global energy uses about 80 percent.

Because if—why we did it? Because our name is International Energy Agency. If we want to deserve this “international,” the first one, we cannot be only the organization of the rich countries. We have to look at the entire world and work with them. And for us, as you mentioned, for energy access is a key issue. Both electricity access and access to clean cooking. I don’t know how much it is well known here in New York, but we have been following this issue—Varun knows very well—since twenty years, how many people in the world, year by year, they don’t have access to electricity; they don’t have access to clean cooking.

With electricity, there are certain progress, but in terms of clean cooking it is not very well known. I give you one number. In Africa—OK, in Africa, four out of five families prepare their meal by using wood, agriculture waste, animal waste, all open fire. And it is mainly—almost exclusively women who are preparing this food. And because of the toxins in the smoke, they have respiratory diseases. And in sub-Saharan Africa for women it is one of the two reasons for premature deaths. Every year—every year, more than half a million, 500,000, women die prematurely because of the respiratory diseases caused by this clean cooking.

And yet, it can be solved with a very limited amount of money. It is the reason we have, last May, organized a major summit—a historical summit in Paris, I chaired it with the prime minister of Norway, president of Tanzania, and raised from both public and private sources 2.2 billion U.S. dollars, and helping and working with the African countries, sub-Saharan Africa, to solve this problem. Is it in our—nobody asked us to do that, to be honest with you. (Laughs.) But we feel responsible because it’s an energy issue, but also the economic issue.

And I am sometimes surprised, to be very frank, don’t misunderstand, but in my view, it’s a gender issue. And if the—I mean, I understand and very much supported the IEA women have better positions in the higher levels, represent excellent. But please also a bit of attention in the African woman. They are dying, by the way. (Laughs.) This is not a simple thing, premature death. And this can be solved. This can be avoided with very little amount of money. So it’s an area that we also take—very much of a pay attention. And I am very—President Lula in the next G-20 accepted our request to put a big emphasis on this issue. He has a good heart for Africa and to address this issue. And I am very happy to have a big push. But of course, there’s a need for bigger forces to help there.

KISSANE: So on the subject of those bigger forces, so COP-29 is meant to also have—double down on climate finance and transition finance, which is coming up very short. So year on year, countries that have committed—have pledged climate finance and are not coming forward with the full amounts, what does that look like? I mean, in terms of for, again, kind of going back to the challenges of the transition and how realistic it is for countries when it’s very, very difficult—those countries that are probably most in need of finance are not getting access to finance for most forms of energy.

BIROL: Right. Now, sometimes we make a lot of studies. And it was maybe too many. I don’t know. Almost, they tell me, almost—last year, IEA made a report every single day. I don’t know how we are doing this. (Laughter.) But when I look at those—when I look at those reports, I mean, if I had to choose if somebody—on what is the single biggest problem to reach our climate targets? What is it? There are so many of them, but if I had to choose one of them, which is the following, I mentioned a few minutes ago that this year $2 trillion clean energy investment will be made. Good.

But the problem is the following. Out of this 2 trillion (dollars), a big chunk of it, 85 percent of this clean energy investment, are made in the rich countries, plus China. Only 15 percent of clean energy investment go to countries where they make about 60 percent of the population. It’s a big, big, big problem there, how the clean energy investment and the emerging world economies will meet.

Now, to be very frank here, it’s a daunting task for COP-29 and COP-30. I hope there will be some good steps made. And in fact, tomorrow I am a chairing a meeting with the COP-29^th president, bringing almost fifty governments together to find a consensus on this issue. But for me, this is the fault line of reaching our climate targets. And here, I believe there is a role for the advanced economies to play.

Now, when we look at the climate problem, the emissions—you know, the global warming is not only as a result of emissions going into atmosphere today, but since hundred years. And here, advanced economies and China have an important responsibility. And I hope they will be as forthcoming as their responsibility when it comes to the clean energy financing in the emerging and developing world.

KISSANE: Excellent. Thank you for that. So I have two more questions, then we’re going to be going out to our members here and online.

So is the 1.5 degrees Celsius target still achievable? And can you sort of also talk to us about the—you just held a big summit on emerging technologies and the role of emerging technologies in helping to sort of maintain or limit temperature rise.

BIROL: So it is—to reach 1.5 is becoming more and more difficult by day because, if you look at the emissions, they are still increasing. 2023 was the hottest year in the history. I don’t want to claim that it will be easy to reach 1.5.

But even if we work to reach 1.5, if we do not reach—if we reach 1.6-1.7, it’s much better than just sit back and—just letting things go. We should make sure that we make the right steps in order to reach the—our climate targets without forgetting energy security and affordability issues.

Now, these technologies that are emerging, I don’t consider solar anymore—it’s coming. But I think there is one technology I would very much like to see flourishing, the other technology making a strong comeback. Which technology I would like to see flourishing, it is the battery storage. This is the nerve center of everything. Everything comes there. If we are able to bring the cost down quickly, it would be really very helpful. This is a technology that we are pushing the governments and the others to be more active because this would enable many other targets to reach.

Which technology I would like to see making a strong comeback and which is—it is making a comeback—and I mentioned this three years ago, that it would make it a comeback and—which is nuclear power. Nuclear is making a comeback and bigger than many people realize. It is everywhere. I was two weeks ago in Korea, Korean government. Japan. In Europe. In the United States, Canada, and many countries the first nuclear, they are very strong. Here we have to fix the nuclear financing. And we are, again—I mentioned IEA reports. Mid-January we are coming with a what kind of pragmatic solutions to nuclear financing report, we are coming up with that.

And the second thing is the—I know that there are some companies, nuclear companies, in the audience. Nuclear industry wanted to see that the wind is blowing in their direction since—it is now. But they shouldn’t take it for granted. Nuclear industry should learn to deliver on time and on budget. They didn’t—to be honest with you, they were not top performers, if I put it impolitely. So it is—yeah.

KISSANE: Well, I think those that are in the audience that support nuclear would definitely like to see the timelines get shorter.

You know, it is interesting. I mean, Microsoft just came out; I mean, they’re going to recommission Three Mile Island here in the United States. I think many sort of countries that had very ardent sort of anti-nuclear policies are doing—are pivoting, you know, embracing nuclear, understanding the importance for also meeting much higher electricity demand. So it’s very important.

BIROL: I completely agree. So I live in Paris, in France. When President Macron took the first time the government—and to be honest with you, President Macron’s position was—he’s a very good statesman—was to bring the share of nuclear down in France. Now, I was interviewed with the French newspaper. They said: What do you think about this? And this is Le Monde, one of the biggest newspapers in France. I said if France abandons nuclear power it is something like a destroyed Arc de Triomphe. I mean, the Arc de Triomphe I don’t know if you know, it’s one of the greatest of France’s national asset.

KISSANE: Yeah. I understand. Mmm hmm.

BIROL: The national asset. And why do—75 percent of the electricity comes from that. But President Macron was wise enough to now just not only keeping the existing nuclear power plants, but building—(inaudible)—others.

Here I want to tell you one more thing. We talk about China. In the last five years, 85 percent of all new nuclear power plants built in the work by China. And our numbers show that in the current context, in four or five years of time China will overtake United States as the number-one nuclear power in the world, just for the record.

KISSANE: Thank you.

So final question before we open up to our members is that of last week the IEA came out with a really important report on Ukraine addressing Ukrainian energy insecurity due to the barrage of brutality against energy infrastructure, looking at a seventeen-gigawatt sort of demand picture this coming winter. Can you sort of speak to that and how the IEA is going to be involved? I think it’s repair, connect, revitalize.

BIROL: First of all, congratulations, you followed that so you could—

KISSANE: I did. I read. I read. I watch the video. I did. I do my homework. I do my homework.

BIROL: Thank you very much. It is not—(inaudible). Thank you very much.

So we—in last June we decided to make this report, Ukraine in winter, and it was before in August—last August Russia bomb again the Ukrainian electricity assets. And it is very fragile. I give you—just think about this. The Ukrainian electricity sector, the capacity, both the plants and the transmission lines, more than two-thirds before the war is destroyed. There are many blackouts, and it is before winter. So in the winter, when the temperature goes down, the electricity/energy demand goes up. And it is—even without further attacks, it is impossible the Ukrainian electricity sector will survive without support. And if you lose electricity, you lose—you lose the support to hospitals, water supply, heat, schools, communication network, and everything.

So I thought it is time to give a heads up to the—because some governments we see around the world, they are becoming, some of them, a bit more hesitant—shall we, shall not—shall we not. There is a(n) urgent need to support Ukraine if we don’t want to see this winter major problems in the energy sector, economy, social life, and beyond. So it is very critical. It is—we want—I am thankful to President von der Leyen. I released the report to international press in Brussels with President von der Leyen of the European Commission to bring everybody’s attention. And we sent the report to many governments around the world, and in many parliaments the committees—I sent, for example, Senator Barrasso here, and also the colleagues in the German Bundestag, in Norway, in U.K., in many countries—so that they are all aware the decisions they will take or not about the fate of Ukraine and the energy situation. Ukrainian colleagues have been working in a heroic manner to survive, to repair, but it is now beyond their ability. So I think they need—they deserve our support. It is reason we made this report.

KISSANE: Yeah. Thank you for that work. It’s very important.

Going to open it up to our members here in the audience. And, look, a hand has just been raised, so they’ll go. You’re going to be first up. And please state your name, please.

Q: Thanks a lot. Debra Valentine.

Could you expand a bit on the role of AI? It clearly is leading to a huge increase in energy demand. You need it 24/7. I mean, it is the cause for Microsoft, you know, entering into the long-term purchase agreement to allow the recommissioning of Three Mile Island. I wish they were doing new nuclear and small nuclear. But how much is it going to increase demand? And to what extent is it going to temporarily pose a problem to transition to sustainable energy, since people will want, unfortunately, oil and gas? And to what extent might it well drive nuclear? What’s the source—what does China use for its AI? Just a lot more on the AI effects on supply and demand in—

KISSANE: Thank you. Great question.

BIROL: So I think it is not an overstatement to see that the AI or the datacenters in general will give a boost to electricity demand growth. It will be mainly in the—in the regions where the datacenters are we will see electricity demand growth to come. But—now, two buts.

First, AI has also a role which will improve the use of energy efficiently. So what will be the net effect is one question.

And the second, the AI-elicited demand growth will not be even within a country. It will be just a bit located regional to look at that. So that’s a big question.

Now, in order to—in order to understand this, on fifth of December in Paris we are bringing all the companies, the major technology companies in the U.S., in India, many parts of the world, Europe and elsewhere, to understand this. And we will come up with a report with some numbers. What does it—what is the net effect of this increase, and from which sources of electricity they should be met? But I—my expectation is it will help the—more the use of clean energy, when I mean clean energy it’s mainly nuclear, and also renewable energies to increase their penetration.

KISSANE: Yeah. Rhodium Group actually came out with a report saying that U.S. electricity demand would rise by about 26 to 29 percent by 2035, much of it, of course, is driven—I think there’s an interesting geopolitics point here, you know, in terms of countries that can take advantage of having data centers be located—you know, having reliable, affordable access to electricity.

OK, we’ll take one more question. We’ll go right here, please, in the third row. Thank you. And then we’ll go to our audience—to our members online.

Q: Hi, Dr. Birol. I’m Will Su from BlackRock. Thank you for your insights here today.

I lead our firm’s energy equity investments. And one of the worrying trends that we’ve seen in recent months is the liquidity crunch faced by some of the leaders in the energy transition. Companies like Northvolt and SunPower. At the same time, you’ve seen traditional oil and gas majors, who are very cash rich and well capitalized, actually step up their investments in carbon capture, advanced biofuels, and even lithium extraction. Can you share your perspectives on the roles that the traditional oil and gas players can contribute in the energy transition? And how do they balance these increased transition investments against the need to reinvest for the considerations of energy security and affordability? Thank you.

KISSANE: Thank you. Excellent question.

BIROL: Thank you. So I believe oil and gas companies, they do have a role to support the clean energy transition, for sure. There are a few reasons for that, I will come. But before that, if I can put the things in a context. When we talk about oil and gas companies and their role in energy transition, we are more focusing on the major oil company in the Western world, in Europe and United States, Canada. But their share in the global oil production is 13 percent. The biggest chunk is coming from other companies that we don’t talk much about, we don’t put so much of a scrutiny, if I may say so. Let me put this—we are talking about 13 percent now. Let me put this in a context.

But second, I am very happy that some oil and gas companies, when I hear their leaders—their business leaders saying a lot of—making good statements about how much they are committed to for a sustainable future. When you look at their statements, a big chunk of it is about this, which makes me very happy. But we look at numbers. Unfortunately, when I look at the numbers, how much of their investments go to—total investment of these companies go to clean energy? How much to the traditional businesses? Last year, of the oil and gas companies, only 4 percent was the clean energy, and 96 percent goes to the traditional activities.

But this is a bit higher in the companies in Europe and some companies in North America, but very low in the national oil companies. Why I say that the energy oil—the oil and gas companies can be helpful? Because they have huge experience in terms of engineering and implementing large-scale projects. And they have a huge experience on certain activities which are—which have affinity with the clean energy projects, such as the offshore activities. So offshore wind and the offshore oil and gas, there are many parallels between them. Or I can tell you bioenergy, or hydrogen, or carbon capture and storage.

But if you tell me, are they making enough efforts? I would say absolutely not. But there’s some better than the others that I should—I should tell you, without giving some names. And my colleague, I see Christophe McGlade is here with us. He knows every single company by their activities, and you can ask him after the meeting. (Laughter.) So I cannot tell you—

KISSANE: OK, thank you. We’re going to take a question from our virtual members.

OPERATOR: We’ll take the next question from Matt Aks.

Q: Hi. Thank you so much. Dr. Birol. I’m Matt Aks with Evercore ISI.

Picking up on some of what you said in response to the very first question, I’d like to ask: When it comes to U.S. oil and gas production, how much do U.S. policies still matter? It strikes me that, looking at the data, that policy changes and even changes between administrations are relatively marginal, and that market forces are the overwhelming driver. So I’d be curious if you agree. And I don’t intend to make this political, but purely as a forecaster, do you see potential U.S. policy changes being a factor in terms of oil markets looking ahead? Thank you.

BIROL: Thank you very much. I will give you some of my view on the markets, but please don’t put me in the U.S. politics. It is last thing I wanted to be. (Laughter.) So we are very simple, modest organization in Paris. (Laughter.) So there are so many things happening here.

Now U.S., both oil and gas production, is growing strongly. And in the last few years, we have seen major growth. As long as we see the prices at these levels, as long as there is a demand, I think it will grow. And I don’t believe that there will be any major obstacles to change this trend, whatever the policies are going to put in place. And the U.S. continue to provide significant demand to oil and gas in the next few years to come. And we have seen recently a very strong both oil and gas production in the United States.

And the—one of the most important ones for the Europeans and the rest of the world is the growing LNG exports from United States to Europe, and the rest of the world. So U.S. and Qatar in the next four or five years bring a lot of energy to the markets, which, in turn, will change the markets from—the gas markets from the seller’s market to a buyer’s market. And the other major gas exporters, such as Russia, will see the consequences of major LNG growth coming from these two countries.

KISSANE: Well, just as a quick follow up, I mean, what was interesting last week, John Podesta, who is the—kind of the sitting climate envoy to the United States, sort of spoke about the national security benefits of U.S. oil and natural gas production and its increases over the last few years, and how it’s, again, to your point, you know, provided enhanced energy security for Europe and different parts of the world, and it’s also maintained lower gasoline prices here in the United States. But also sort of highlighted the fact that it’s not an either/or, that the United States can also, you know, double down through the IRA and climate policy. So can kind of do all of the above.

BIROL: And IRA also, we talk about the climate benefits, the manufacturing benefits. But one of the IRAs, I think, perhaps not to overlooked the benefits, is the—today and tomorrow’s jobs. It’s a job-creating machine, the IRA.

KISSANE: Great. We’ll take another question here. Right, the woman with the glasses, sorry, there.

Q: Hi. My name is Rebecca Elliott. I cover energy for the New York Times.

I’m wondering what you see as the role of natural gas over the coming decades in meeting these dual demands of both rising energy need and energy transition targets. Thank you.

BIROL: So natural gas. When we look at the natural gas demand, we see two different trajectories. In the advanced economies, we see really a bleak picture, but in the emerging and developing countries we see a natural gas demand to increase, and mainly to replace coal, which is effectively good news, in my view. And two things I have to tell you. One, in most part of the world during the production and the transportation of natural gas, there are significant amount of methane emissions leakage, which is a major problem. Methane is a very potent gas, and today, together with carbon dioxide, it is the major troublemakers in terms of the climate change. And, second, if we want to reach 1.5, if we were to reach 1.5, the natural gas share in the future need to also be going down or used in a sustainable way, the concept of carbon capture and storage or renewable gas—renewable gas context.

But to come a bit shorter term, I believe next five years we will see a completely different natural gas market. In the next five years, starting from 2025-2030, the amount of new LNG will come to the markets will be about 50 percent what we have built in the last forty years. So about 250 bcm will come. And this will have a big impact both in terms of prices, in terms of the exporter’s power, either commercially or otherwise, and in terms of the—for example, the continents like Europe, whose competitiveness is at a difficult situation. It will be a breathing space for such regions. So we have—in our recent virtual energy outlook, we have highlighted the very fact that next five years will be very different for the natural gas markets because of the U.S., Qatar, and some other countries, the big growth coming from LNG. This is something that one needs to pay attention to, especially when it comes, again, with trade, competitiveness, and other issues.

KISSANE: Excellent. Thank you very much. We’ll take one more question from the—yes, right there. The man right next to the woman who just asked the question. Thank you.

Q: You mentioned the interlock—increasingly interlocking nature of energy policy, trade policy, and industrial policy. As that develops, what additional measures do we need in order to ensure that global governance can handle that that merger? And thinking of sort of factors like corruption, statism, democratic distrust, in the context of the resource curse. What do we know from experiences with addressing that resource curse that could help us answer that question?

BIROL: This is a question for Mike, I think, but I will answer. (Laughter.) So I believe, for the countries who are major oil and gas producers, or, in other words, whose economies are intimately linked to oil and gas revenues, it is the highest time, if not too late, to diversify their economies. Now, you just mentioned in the beginning, you put it much better than me, oil prices are $70 despite the war in Middle East, despite Libya oil production, 1.2 million barrels per day, is shut down. And oil prices don’t go up. So it—is a it is a very important signal for the countries who have to—whose economy is relying on oil and gas revenues to diversify. You cannot just blame the numbers, this person, or that person. This is happening. Global oil demand will slow down.

If the oil demand slows down, the oil prices will be also on the moderate level because revenues are your exports times the price. If the price goes down, your exports goes down, your revenues will be less. So your economy cannot rely only on the—on this goods. And, to be honest with you, I mentioned to you our trade report coming. When I look at the numbers, the trade of the clean energy manufacturers, the value of this—the batteries, the solar panels, and so on—will be very soon competitive to the fossil fuel trade, if not higher. So there is a new dimension coming there. And how it is going to be governed, what is right, what is a fair trade, what is the efficient trade is—of course, will be a discussion for the WTO and the countries who are involved in the trade interactions.

KISSANE: Thank you. So many different ideas there, right? And just yesterday, in terms of the U.N., Guterres talked about the need for more multilateralism. However, we’re seeing many more factions and contentious trade policies, but I think sort of highlights some of the challenges we have.

We have a question right there, please. Thank you.

Q: Jennifer McFarland. I’ve been in the clean tech industry for twenty years.

Could you tell me about your perspective on the hydrogen sector?

BIROL: So, OK, you ask very short, I give you a very short answer as well. (Laughter.) So in the energy world, everything is—there are very different views on every single field. This is for oil, for gas, for nuclear, for—I also—another hat. I am the chair of Davos World Economic Forum on energy issues. One day—I mean, it was, I think, four years ago—three or four years—I hold a meeting with several government people and businesspeople. I was very surprised. When it comes to hydrogen, everybody loves hydrogen. There is something very unbelievable there, that for the first time I believe that there is no fight. Everybody loves hydrogen.

Now, from loving coming to the—to the real life. (Laughter.) When I look at it, the real life, I am very sorry, but I—even though hydrogen is very versatile when I look at the options, you can produce hydrogen from different fuels, you can use hydrogen for different needs. But when I look at today how much demand we have created for hydrogen, where the cost is, I have difficulties to believe that, let’s say, before 2030 hydrogen will play a significant role if there are no significant steps made by the government to create demand, to regulate the hydrogen trade, and others. So the appetite—there is a gap between the appetite, the plans, strategies, and what is happening in the real life. There is some gap there. As I said, only 2030, maybe after that. But in the short term, I don’t expect big jump on hydrogen.

KISSANE: OK, thank you. We have time for one more question. OK, right here. Thank you.

Q: Yeah. Jeff Mauer (sp) with S&P Global.

So I know you don’t want to talk about politics, but what—(laughter)—you mentioned that, with the upcoming election probably wouldn’t have too much of an impact on U.S. production. What about production outside of the U.S.? Would you consider sanctions on Venezuela, on Iran, on Russia—do you think it’ll have any impact there? And also—maybe different scenarios. And also, where do you see production growth coming outside of those four areas, U.S., Canada, Guyana, Brazil. Do you see any areas that are, I don’t know, like, maybe a surprise down the road? A potential?

BIROL: What is the issue with the U.S. elections, this one?

Q: Well, there are currently sanctions on Venezuela that are kind of being enforced. You know, I’m not—maybe if you can just talk about that. I think that’s kind of an odd scenario myself. It’s we’ll sort of enforce sanctions. Is the idea we’ll keep gasoline prices less high if we keep the oil going?

BIROL: OK. So, of course, have those sanctions—are they going to be lifted or are they going to be in place will be depending on the results of the U.S. elections. It is—we were—in the beginning, fifteen months ago, we forecasted oil demand perfectly. But for the U.S. elections, I cannot guarantee that to the same extent. (Laughter.) I will leave it to the colleagues here. But if the current—the oil supply—in my view, it’s a very comfortable one, especially when you get the demand. And I am sure many of us are aware, but current spare production capacity in the OPEC countries are about 6 million barrels per day, one of the highest in history. There is a big spare production capacity, 6 million barrels per day. The Americas bringing a lot of oil. Demand is weak. If the sanctions are—as a result of the American elections are lifted in Venezuela and Iran, it will—it will further make the markets more comfortable, put more downward pressure on the—on the markets. So this is—but I cannot speculate, neither on the—what the sanctions will be, more sanctions/less sanctions. But if it happens—sanctions are lifted—more oil will come to the markets on top of the—already supply—or, big supply coming from Americas, plus 6 million barrels per day of spare production capacity, which is growing by day.

KISSANE: That would make for much lower oil prices, right, which don’t make some countries happy.

OK. Well, thank you so much, Dr. Birol. It was such a pleasure and an honor to have you—(applause).

I’d also like to extend my thanks—our thanks to those members here in person and those online. Thank you for—all of you just totally hit it for your questions. They were great questions. And again, thank you so very much.

I told Dr. Birol that he is widely quoted in my classes, that my students are regular readers of the IEA reports. And thank you so much for—

BIROL: Thank you very much. You too. Thank you.

KISSANE: Thank you. Thank you.

BIROL: Thank you. (Applause.)

(END)

This is an uncorrected transcript.