As we move on from the previous week, let's take a moment to consider the important developments in global energy markets and within Azerbaijan. This week has been eventful, with fluctuations in oil prices driven by geopolitical tensions and valuable insights shared at Baku Climate Week. These events have the potential to significantly impact the future of energy, both on a local and global scale.

Baku Climate Action Week: Glimpse into Azerbaijan's COP29 agenda

From September 30 to October 4, Azerbaijan hosted the inaugural Baku Climate Action Week, marking a significant event in the run-up to COP29. The gathering set the stage for COP29's climate agenda and gave insight into Azerbaijan's approach to tackling global climate challenges.

During the event, Mikayil Jabbarov, Azerbaijan's Minister of Economy, addressed the economic complexities of transitioning to renewable energy. He cited the IMF’s 2023 report, which noted that global fossil fuel subsidies reached a staggering $7 trillion—about 7.1% of the global economy. These figures underscore the global reliance on traditional energy sources, even as countries push for a greener future.

Afgan Isayev, Vice President of SOCAR, highlighted the delicate balance between ending fossil fuel subsidies and ensuring affordable energy access. While removing subsidies could promote energy efficiency and combat climate change, it also risks inflating energy prices, placing an economic burden on consumers.

Global Oil Market: Geopolitical shocks provoke "Black Gold"

The week kicked off with Brent oil prices dipping below $70 per barrel on October 1, marking a bearish start to the week. However, as media outlets reported that Iran was poised to launch retaliatory strikes against Israel, the global energy markets reacted swiftly. By mid-day, oil prices surged to $73 per barrel. When footage of Iranian rockets targeting Israel hit the airwaves, the London Stock Exchange closed with Brent oil trading at $75.35.

Although the rocket attacks resulted in minimal casualties, with only one confirmed death—a Palestinian civilian—the fear of further escalation rattled the market. The next day, oil crossed the $76 mark as Israel threatened retaliation, pushing prices even higher. By October 3, the price of Brent oil had climbed to $78 per barrel as concerns mounted over potential strikes on Iran, a major player in the global oil market.

The unpredictability of military and political moves, rather than supply and demand factors, is now a key driver of oil price volatility. This development makes it increasingly difficult to forecast where prices will go next. As it stands out, for now, oil prices in global markets declined, while Azerbaijani crude under the "Azeri Light" brand has gained value.

Cost of Energy Transition: A daunting challenge

Jabbarov shared insights into the long-term costs of the global energy transition. He noted that over the past 20 years, investments in green energy amounted to $10 trillion. However, achieving net-zero emissions by 2050 would require an astronomical $250 trillion—roughly $10 trillion annually. These numbers highlight the enormity of the challenge facing global leaders at COP29, where discussions will center on how to mobilize the necessary funds for a sustainable energy future.

Azerbaijan's "Green Energy" vision

Parviz Shahbazov, Azerbaijan's Minister of Energy, outlined the country's ambitious plans to increase the share of renewable energy to 33% of total energy production by 2027. Azerbaijan has already made significant strides with the completion of a 230 MW solar power plant. Future plans include the construction of two additional solar power stations with a combined capacity of 340 MW and a 100 MW plant, the results of which will be revealed ahead of COP29.

In the liberated areas, Azerbaijan has also advanced its green energy goals, with eight new solar and wind power stations set to reduce carbon emissions by 2.9 million tons annually.

Baku’s trade turnover growth: Catalyst for investment opportunities

Alongside climate and energy discussions, Baku’s trade turnover growth is also garnering attention as a driver of economic opportunity. Azerbaijan’s trade turnover has grown steadily, with Baku emerging as a key hub for investment, especially in sectors like energy and logistics.

One of the main factors contributing to this growth is Azerbaijan's strategic role in transcontinental trade corridors, particularly the North-South Corridor, and its participation in the Middle Corridor, which connects Asia and Europe. Azerbaijan’s increasing trade activity has become a catalyst for foreign investments, bolstering its already strong economic ties with countries such as Russia and Türkiye.

As Baku becomes more integrated into global logistics and energy supply chains, its economic opportunities grow, attracting international businesses and fostering innovation in key sectors. This dynamic could further accelerate as COP29 approaches, presenting Azerbaijan as not only a player in global climate talks but also as a lucrative investment destination.

Finally, the recent volatile energy landscape has clearly demonstrated the significant interplay between geopolitical events and global energy markets. Baku Climate Week has provided Azerbaijan with a valuable platform to showcase its unwavering commitment to renewable energy and its readiness to host COP29. As the world progresses towards a greener future, Azerbaijan's balanced approach to energy transition, addressing both opportunities and challenges, is poised to exert a substantial influence on global discussions.