Renewable energy investments must not flag even when oil prices fall

Recently, there has been a lot of discussion about energy prices, as the world is caught in an upward trend in oil prices. Brent crude prices rose nearly US$20 in the three months from June to September, averaging US$94. With the recent conflict in the Middle East, prices reached as high as US$96. This surge has a significant impact on global economies, particularly in terms of inflation, exerting sustained upward pressure on prices across various sectors. The main culprits behind the rise in oil prices are the giants of the energy world: primarily Saudi Arabia and Russia. Their strategic manipulation of oil supply has nearly breached the psychologically significant one-hundred-dollar mark, causing unease throughout the global economic landscape.

The decision by Opec and its allies to reduce supply was a strategic move aimed at bolstering a market battered by lacklustre demand. This precautionary measure was intended to prevent further downward spirals and stabilise the volatile oil market. In addition, Saudi Arabia went the extra mile by promising a unilateral production cut of one million barrels per day from July to balance its budget. The Opec alliance has signalled its commitment to this strategy until at least the end of 2024, indicating that rising oil prices are here to stay for the foreseeable future.

On the other hand, Russia is increasingly concerned about domestic petrol and diesel shortages, leading to a temporary ban on exports, with only intergovernmental agreements exempted. According to the Kremlin, the rationale behind this move is to address soaring energy prices within Russian borders. However, Russia finds itself in a precarious balancing act as its export cuts dent its oil revenues, all while the Ukraine conflict continues to drain its resources; therefore, the duration for which it can maintain this policy remains uncertain.