The oil supply is collapsing. It’s time to focus on demand.


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Rush hour traffic in Los Angeles. The International Energy Agency has come up with ideas to reduce driving – and the demand for gasoline.

Patrick T. Fallon/AFP via Getty Images

In Europe and the United States, governments have responded to high energy prices by focusing primarily on supply.

Germany is increasing its investment in clean and dirty fuels in an attempt to reduce its dependence on Russian oil and gas, which means using more coal than expected and increasing imports of natural gas from the United States while planning for growth faster renewable energy. The United States and other countries are exploiting their strategic oil reserves to fuel the market and drive down prices.

Oil prices were mixed on Friday, with Brent down 0.3% to $106.34 a barrel.

These measures could alter the supply situation for various commodities. But most countries haven’t focused so much on demand as offering subsidies to the oil industry to keep prices low, as Japan has.

A policy that is spreading in the United States is to reduce gasoline taxes, a move that critics say encourages car driving and is ineffective because the full benefit of the reduction may not be passed on to consumers.

The International Energy Agency thinks it’s time for a much more comprehensive plan to meet oil and gas demand directly. In general, climate proposals cannot succeed by simply targeting energy supply – if people continue to demand an increasing amount of oil and gas, emissions will simply continue to rise. Global oil demand is expected to hit new records this year or next. If people continue to demand more oil, efforts to affect supply by forcing oil companies to cut back on drilling will not be very effective.

Environmentalists and some investors have criticized oil companies for their failure to reduce so-called scope 3 carbon emissions, which are the emissions created when people use their products like gasoline. But in an interview with Barrons Last year,


(ticker: CVX) CEO Mike Wirth said these emissions were largely the result of demand issues.

“Scope 3 emissions are a function of global energy demand,” he said. “If you have a company saying ‘we’re going to produce less traditional energy’, which some companies in our industry have done, that doesn’t necessarily change demand. It simply shifts that request to be met by someone else.

Wirth supports a carbon price – which in some regions takes the form of a tax – as a method to incentivize climate-friendly actions.

The IEA released a 10-point plan on Friday that it says could reduce global oil demand by 2.7 million barrels a day over the next four months, potentially enough to offset the expected loss in oil exports. Russian as a result of the sanctions.

“Many of these measures can be implemented directly by other levels of government, such as state, regions or local authorities, or simply followed voluntarily by citizens and businesses, saving them money. money while showing solidarity with the people of Ukraine and reducing greenhouse gas emissions,” the proposal reads.

The plan offers ideas to make countries more energy efficient, including introducing car-free Sundays in cities and having employees work from home three days a week if possible.

Here are the 10 ideas:

1. Reduce highway speed limits by at least 10 kilometers (6.2 miles) per hour.

2. Work from home up to three days a week.

3. Car-free Sundays.

4. Cheaper public transit and more pedestrian and bike friendly streets.

5. Alternate who can drive on city streets, encouraging carpooling.

6. Encourage carpooling.

7. Promote more efficient freight delivery.

8. High-speed trains above planes.

9. Avoid business trips whenever possible.

10. Smooth the deployment of electric vehicles, in particular by improving supply chains.

Write to Avi Salzman at [email protected]


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