Climate target walk-backs highlight ‘overzealous’ policy pledges, OPEC chief says

LONDON — The recent spate of countries postponing or adjusting their climate targets shows that some of the initial pledges were ‘overzealous,’ the head of the OPEC group of oil producers said Monday.

“I hope they are not U-turns, as much as they are a recognition and the realization that some of the policies may have been a bit overzealous: the timelines, the deadlines, the time constraints,” Haitham al-Ghais, head of the Organization of the Petroleum Exporting Countries, said.

Speaking to CNBC’s Dan Murphy on the first day of the Abu Dhabi International Progressive Energy Congress, he added that an efficient energy transition away from fossil fuels needs “the right infrastructure in place,” such as electrical grids, sufficient charging stations for electric vehicles, and the availability of critical minerals.

Among such climate policy walk-backs, al-Ghais cited Poland’s move to appeal against European Union policies to ban the sale of fossil fuel cars from 2035; the recent EU agreement on a diluted version of the bloc’s ‘Euro 7’ emissions rules; and the U.K.’s shift to delay a prohibition on the sale of new gasoline and diesel cars from 2030 to 2035.

“I think when it comes to consumers feeling a pinch in their pockets, that’s when politicians become aware that it is difficult to implement policies that [are] maybe too aggressive, or a bit overzealous without having the right systems in place, to make sure that whatever new policies are advocated for do not affect the consumers,” al-Ghais said.

Some traders and analysts say a confluence of voluntary and coordinated supply cuts implemented by OPEC and its non-OPEC allies, collectively known as OPEC+, contributed — alongside demand recoveries — to a surge in oil prices that is fueling global inflation. This is a particular risk in Europe, where sanctions in the wake of Moscow’s full-scale invasion of Ukraine have cut off buyers from Russia’s crude and oil products. Ice Brent crude futures with December expiry were trading at $92.67 per barrel at 13:10 London time, up by 47 cents per barrel from the Friday settlement.

Asked about the impact of high oil prices on consumers, al-Ghais said this “depends on the state of the global economy” and noted increases in oil demand.

“I think this in itself answers the points about, are these price levels affecting demand? We’re seeing historically high, phenomenally high growth figures for oil demand,” he said.

Despite this, several European traders and refiners have said that crude prices above $100 per barrel raise the possibility of demand destruction, where — in the case of the oil market — consumers respond to higher prices at the pump with fewer purchases. The Paris-based International Energy Agency has, meanwhile, projected that demand for fossil fuels like oil, gas and coal will peak before 2030 — a forecast that OPEC rejects.

An OPEC+ technical committee convenes digitally on Wednesday to review market fundamentals and the individual production compliance of member countries. While in itself unable to tweak OPEC+ policy, this Joint Ministerial Monitoring Committee can call for an emergency ministerial meeting of the coalition. Three OPEC+ delegates, speaking anonymously because of the sensitivity of the discussions, told CNBC it is unlikely this week’s JMMC meeting will lead to policy adjustments.

The good faith of OPEC+ countries in their climate commitments has been questioned given their role as crude producers and because several members, while in the process of diversifying their economies, depend on oil revenues.  

OPEC scored an indirect victory with the naming of its third-largest member, the United Arab Emirates, as host of the upcoming COP28 diplomatic gathering on climate change over Nov. 20-Dec. 12. The controversial appointment — along with that of state-owned Abu Dhabi National Oil Company boss Sultan al-Jaber as president of COP28 — has resulted in vocal public backlash, with critics citing the discrepancy between the UAE’s growing oil production capacity and its professed climate commitments.

“I believe it is the right choice for COP to happen in the UAE, in an oil producing country, to show the world how oil producers can decarbonize, reduce emissions, as well as continue to provide stability and security in terms of world supplies,” al-Ghais said Monday, adding that OPEC will be represented at COP28 with a “nice, big pavilion” to promote the individual climate work of coalition members.

While formally reunited by their common interests in the oil market, some OPEC members have the capacity to produce renewable energy, such as solar, while Saudi Arabia and the UAE have set sights on producing and marketing hydrogen.