Although oil and gas companies may be facing a huge opportunity from the Ukraine war, few in the industry are willing to admit it. Many are using soaring fuel prices and fear of fuel shortages as leverage to secure their position with governments in ways which could have devastating impacts on the climate crisis.
There is a lot of opportunity for oil and natural gas companies, although Im sure it is not one that they would choose, said Robert Buckley from Cornwall Insight. He is the head of relationship development at Cornwall Insight. They have the chance to reposition themselves [as crucial to policymakers]. There will be a high price for oil for a long period of time.
Oil prices have risen dramatically to more than $130 per barrel. This has caused petrol prices to rise to more than 155p per litre in the UK, while gas prices have also risen.
Luke Sussams of Jefferies investment bank said that the high-priced environment is likely to continue for a long time. Boris Johnson stated that the North Sea will see a greater amount of production in addition to the accelerated deployment renewables. There are growth opportunities and upside potential. [for fossil fuel producers].
The US, UK, and EU have all announced severe restrictions on oil and gas imports from Russia. This will most affect the EU as around 40% of EU gas comes directly from Russia. However, it will also impact all countries since prices are set internationally. These governments are seeking to ensure their energy security by increasing renewable energy and looking for alternative sources of oil.
Opec and Saudi Arabia, in particular, are obvious places to go, but they have not yet committed to increasing production. The FT reported that an ambassador from the United Arab Emirates to the US favored an increase. This news caused oil prices to drop by about 11% from peak.
The crisis gives western oil and energy companies like BP, Shell, Exxon, and Total leverage with governments. Boris Johnson, UK prime minister, spoke out against Labour’s Wednesday calls for an oil company tax. He stated that the net result would be for oil companies to raise their prices and make it more difficult to do what is required to get rid of Russian oil and natural gas dependence.
Robin Baillie, a partner in Crowell and Moring’s energy group, stated that governments around the globe are searching for short-term solutions for finding alternative energy to Russian energy. The UK is likely to find a solution in the North Sea until more renewables become available.
New oil and natural gas fields can take years, sometimes even decades, to become commercially viable. This means that even if companies start exploring immediately, it won’t reduce current prices. Big oil and natural gas companies have a lot of cash that they could use to pump more from existing fields or explore new ones.
Green campaigners warned oil and gas companies were using Ukraine’s emergency as a way to further their interests. They encouraged governments and oil companies to prioritize oil and gas production, and to make decisions now on investments that would not only have little impact on the crisis but would greatly increase fossil fuel use for many years to come.
Marc van Baal, from Follow This, a group consisting of 8,000 green shareholders in oil-and gas companies, stated: The oil-and gas industry leaders have demonstrated in the past years that they want to keep their old business model. This is what they know to turn hydrocarbons and petro-dollars. So I am afraid that this is what they are telling governments.
Tessa Khan is the director of Uplift which campaigns to end North Sea fossil oil fuels. She said: It is shameful that oil companies, some of who have profited for years from their Russian partnerships, now seek to use the humanitarian crisis to advance their interests. It is unbelievable that they are still being heard by governments, including the UK.
The International Energy Agency provided a stark reminder about the likely consequences of increased dependence on oil or gas by reporting on Tuesday that greenhouse gases had experienced the largest annual increase in 2021. Global energy watchdog, the International Energy Agency, found that energy-related carbon dioxide, which makes up the bulk of greenhouse gasses, rose by 6% to 36.3bn tons in 2021. This was their highest-ever annual increase. It was due to the recovery of the global economy from the Covid-19 pandemic. The growth relies heavily on coal for power. The global increase in CO2More than 2bn tonnes of emissions were produced, which was the largest absolute historical record, surpassing the decrease in emissions that occurred during the lockdowns for 2020.
The UK, the EU, and the US are also looking into renewable energy and energy efficiency as alternatives to oil and natural gas. However, if fossil fuel companies decide now to expand exploration or production, this will continue to cause high emissions for many years and decades.
Lori Lodes, executive Director of Climate Power, a US campaigning group, stated: More drilling in more locations isn’t a short-term solution, it’s a long-term issue that only makes oil and natural gas CEOs richer, and locks us into greater dependence on unreliable, expensive, volatile fossil fuels.
