In 2023, climate change yet again became more disruptive and deadly. These intensifying impacts tell us that the world must urgently cut greenhouse gas emissions and increase adaptation efforts to protect vulnerable populations. Recalling the United Nations Framework Convention on Climate Change and the Paris Agreement, and the promise of leaving no one behind in the 2030 Agenda for Sustainable Development, the 28th Conference of the Parties (COP28) by the global decision-making body of the UN Framework Convention on Climate Change (UNFCCC) held in Dubai, United Arab Emirates, just before Christmas on December 12, 2023, mentioned reducing the use of all fossil fuels and keeping the global temperature from rising above 1.5 degree Celsius. However, the unfolding of events around COP28 presents yet another compelling argument for the Global South contending with the developed West to fulfill their energy demands. The draft text on climate change was criticised as too weak by countries that included Australia, Canada, Chile, Norway and the United States. The draft text mentions eight nonbinding options countries could take in cutting emissions, including reducing both consumption and production of fossil fuels in a just, orderly and equitable manner to achieve net zero by, before, or around 2050. They are among nearly 100 nations that want a complete phase-out of coal, oil and natural gas use which has opened an arena for the Global South’s shuttle diplomacy for securing its energy needs. The Global South can position its need for energy as a third party to negotiate a much more feasible supply chain mechanism to harness fossil fuels at competitive prices both from OPEC+ countries and the United States.
The role of fossil fuels was hotly debated in the COP – particularly as big consumers and big economies like China and India are against any curtailment of its planned development. At present the final draft is stuck on using the term Phase-out vs Phase-down of fuel, as India had insisted in Glasgow COP. India has also made it clear that cuts must be on all fossil fuels, not just coal which amounts to 73 percent of Indian power generation.
The role of fossil fuels was hotly debated in the COP – particularly big consumers and big economies like China and India are against any curtailment of its planned development. At present the final draft is stuck on using the term Phase-out vs Phase-down of fuel, as India had insisted in Glasgow COP. India has also made it clear that cuts must be on all fossil fuels, not just coal which amounts to 73 percent of Indian power generation
Global oil demand in 2023
With huge volumes of US oil production and Brazilian and Guyana output, the Organization for Petroleum Exporting Countries and its allies have lost their grip on global crude flows, as their market share has dropped to its lowest level in more than a decade. As of December 2023, the market share of OPEC+ was 51 percent, according to the International Energy Agency’s oil report. The level has not been that low since the group expanded to include additional allies in 2016. Over the last 18 months, the focus globally has shifted to balancing energy transition with improving energy access, ensuring energy security and providing affordable energy supplies and challenges from policymakers seeking to simultaneously meet decarbonisation goals and expected oil and gas demand. Moreover, the imminent financial and social future of oil and gas companies is increasingly at risk amid a global energy transition.
A record supply of crude oil from the United States, Brazil, and Guyana, combined with an easing of demand, prompted some OPEC+ members to announce more extensive cuts. For the year, OPEC+ is on track to post a decline of 400,000 barrels a day to stabilise crude prices, which have fallen 20 percent in the last two months. Meanwhile, the US is on track to increase its supply by 1.4 million barrels a day this year. There has been an increase in drilling efficiencies and well productivity in the shale patch for American producers. Despite warnings of an upcoming economic slowdown, the US oil supply exceeded 20 million barrels a day in September. Saudi Arabia has shouldered the bulk of the supply cuts, and Iranian production has been at its highest in five years.
A significant reduction in fossil fuel production and consumption is unlikely in the near term, but it will be a necessary measure by 2050. For instance, high domestic energy demand has led the United States to import more oil than it exports. Hence, a small section of mankind has exploited nature indiscriminately, and due to the lack of timeframe to correct the mistakes of the last century all of humanity pays the price, especially the residents of the Global South, particularly India
Now, given current macroeconomic headwinds viz., the Israel-Palestine Conflict, the Russia-Ukraine Conflict and other proxy wars in Asia Minor and South-East Asia, among others could push the demand for crude oil in 2024. This has put developing countries in a better position to bargain as upstream companies are now under pressure to maintain shareholder payouts or increase their hydrocarbon reinvestment rate, driven by the urgency to provide affordable energy to the world. Developing countries can cash in on this opportunity to stockpile oil for future energy needs before the tables are turned amid mounting pressure from Europe as the continent undergoes broad manufacturing and industrial slump. Although non-OPEC+ supply growth is expected to slow down in 2024, forecast gains of 1.2 million barrels per day may still exceed global oil demands as petrochemical activity shifts increasingly towards the Global South.
Varying timeframes for India’s geopolitical activity
A significant reduction in fossil fuel production and consumption is unlikely in the near term, but it will be a necessary measure by 2050. For instance, high domestic energy demand and a mismatch between refining capacity and the type of crude oil produced by U.S. shale fields have led the United States to import more than it exports. Hence, it is not incorrect to state that a small section of mankind has exploited nature indiscriminately, and due to lack of time to correct the mistakes of the last century all of humanity pays the price, especially the residents of the Global South, particularly India.
Currently, India’s share of carbon emissions is less than 4 percent, although climate agencies say the figure is closer to 7 percent. Nevertheless, India has decided to increase non-fossil fuel to 50 percent of the mix and has announced to stick to a net zero target of 2070 rather than sooner. The decision takes into consideration the nation’s need for coal and crude oil to achieve the objective of a developed India
India fuels 17 percent of the world’s population and is the most populous country, and it has outlined its interest in decisions adopted at COP 26 highlighting that all countries should have equitable access to the global carbon budget. The geopolitical activity of India indicates intensified climate action, investment and new technologies for the country’s transition to a clean and climate-resilient economy while administering and propagating fuel efficiency standards for the Global South that will not squeeze out the finances. Today India’s share of carbon emissions is less than 4 percent, although climate agencies say the figure is closer to 7 percent. Nevertheless, India has decided to increase non-fossil fuel to 50 percent of the mix and has announced to stick to a net zero target of 2070 rather than sooner. The decision takes into consideration the nation’s need for coal and crude oil to achieve the objective of a developed India. Thus, the non-OPEC supply between bullish and bearish impulses looks set to continue into 2024. And as Christmas lights fade into the New Year, India should hope for well-moderated oil diplomacy revolving around climate initiatives, price volatility and energy demand.
–The writer is a professional and experienced writer having worked with multiple organisations. He is a keen observer of global affairs, geopolitics and how it affects the world order. The views expressed are of the writer and do not necessarily reflect the views of Raksha Anirveda
