Page 9 - FSUOGM Week 27 2021

FSUOGM COMMENTARY FSUOGM

Striking a balance in the

global energy transition

As oil prices rise to their highest level in almost three years, OPEC and its partners are
discussing a deal to increase production. Abandoning fossil fuels is a hot topic, but like

it or not, oil remains the world’s most important commodity, says Karin Kneissl

GLOBAL AS oil prices rise to their highest level in almost Karin Kneissl former
three years, OPEC and its partners are meeting Minister of Foreign
to discuss a deal to increase oil production. Saudi Affairs of Austria
Arabia and Russia are in talks to release more and an independent
barrels into the market after Brent crude prices member of the board
climbed to above $76 a barrel on July 1. Aban- of directors of Rosneft
doning oil and other fossil fuels is currently a hot
topic of discussion. However, like it or not, oil
remains the world’s most important commodity
and its prices can be considered a barometer for
the global economy.
Whilst the need to manage CO2 emissions
is undeniable, it is important to recognise that a
rapid energy transition comes with considerable
risk. In writing oil off as inherently harmful and
dirty, we are in danger of evaluating our energy
supplies too simplistically and acting impul-
sively. The International Energy Agency (IEA)
recently issued a sensational warning to the
industry, saying that if the world wants to achieve
net-zero emissions by mid-century, investors stability of supplies. He noted that pressure
should stop financing new projects focused on from investors means companies are “only
oil, gas and coal supplies. implementing projects which will pay off over
However, calling for the complete reconsider- the coming years, and are refusing to search for
ation of our energy supplies disregards the laws and explore new reserves.” As such, oil and gas
of demand and supply. Minimising our impact reserves additions are at a “historic low.”
on the environment and making energy sources Igor Sechin is right to be worried about the
more efficient should be a collective ambition, depletion of the resource base. The volume of
but drastic action can be deadly. A hasty energy investment has also significantly decreased
transformation could jeopardise energy security against the backdrop of price cycles and sharp
and have many problematic socio-economic fluctuations in 2008, 2014 and, of course, 2020.
repercussions. This will result in a global reduction in supply
The Energy Panel at the St. Petersburg Inter- and, inevitably, new price peaks, such as that
national Economic Forum (SPIEF) last month which we are seeing now.
convened experts and executives who advocated Another concern is the time taken to create
taking a holistic view of the situation. Among commercially viable technologies for renewa-
them were BP’s CEO Bernard Looney; former bles and the unreliability of alternative energy
BP CEO, current OGCI Chairman and Member sources. We find ourselves caught between
of the Board of Directors of Rosneft Bob Dud- the noble ambitions of green activities and the
ley; Chairman of China’s CNPC Dai Houliang; very real risk of blackouts. For example, a net-
world-leading traders – respective heads of work overcrowded with electric vehicles (EVs)
Glencore, Trafigura and Vitol Ivan Glasenberg, is vulnerable on account of its complexity. The
Jeremy Weir, Russell Hardy; and senior repre- explosion in demand for materials like cobalt
sentatives of ExxonMobil and Chevron. and lithium, needed for electric transport, pre-
In his opening speech, Igor Sechin, CEO of sents another issue. Can we ensure sufficient
Rosneft, warned against underinvestment in production of these commodities when the
oil, highlighting it may threaten the long-term main reserves are concentrated in less accessible,

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